E-T6ll0-31 E-T6lt0-21 E-T6tr0-R9 E-T6n0-26 E-T6^0-27

EFTA Surveillance Authority Attn: Mr Xavier Lewis. Ms Florence Simonetti. Ms Fiona Cloarec Rue Belliard 35 BE-1040 Brussels

E-r6t10-33 Luxembour g, 28 J anuary 201 |

Dear SirAvladam.

Case E-16/10 - PhiW Mowis Norway AS v Staten v/Ilelse- og omsorgsdepartementet

The time-limit for the submission of written observations provided for in Article 20 of the Statute of the EFTA Court has expired. The Court has received and registered written observations from the following:

Reg. number Philip Morris Norway AS E-t6l10-23 Staten v/Helse- og omsorgsdepartementet E-t6ll0-31 Government of Finland E-t6lt0-21 Government of Iceland E-t6/10-21 Government of Portueal E-t6tr0-r9 Govemment of Romama E-r6l10-32 Govemment of the United Kinedom E-t6n0-26 European Surveillance Authority E-t6^0-27

European Commission E-16/10-1 1

Please find enclosed a copy of the written observations listed above.

Yours faithfully,

Skrili Magnrisson Registrar

Encl.

l, rue du Fort Thiingen,L-1499 Luxembourg. Telephone: +352 42 108-1. Telefax: +352 43 43 89 E-mail: [email protected] ofil.o Advokatfirnraot Schio(lt nA - Org.no.: 983 490 7 SiTAVANGTJfI Dronning Mauds gt. 1{ P.O.Box 2444 SoUi NO-oi Bt]RGE:N Oslo Norway Al"r{iuNf) Phone: +47 22 01 88 00 Fax: +47 2283 17 12 SrilJSSgt_ SCHTODT Member of the Norwegian Bar Association www.tichi0rJt, no

,r... *.ri,'1'lr ;'1,::rrl -Zf Re lI i,,tr,r.r', rr!.t{f,el. 1u1" ".f;lflfu ",,""...?*.., , llr . fc,:::1,.. ,,"" 2o!r-\ " v " d cERTI F/E"o coPY lL'ryt-/ -/ TO THE PRESIDENT AND MEMBERS OF THE EFTA COURT

WRITTEN OBSERVATIONS

submitted, pursuant to Article g7 of the

Rules of Procedure and Article 20 of the statute of the EFTA Court, by

Philip Morris Norway AS

represented by

advokat Peter Dyrberg (of the Danish Bar), advokat Jan Magne Juuhl-Langseth (of the Nonruegian Bar), and avocat Michel Petite (of the Paris Bar),

in Case E-16/10

Philip Morris Norway AS

Staten v/ Helse- og Omsorgsdepartementet in which Oslo tingrett ('Oslo City Court') has requested a ruling pursuant to Article 34 of the Agreemertt between the EFTA States on the establishment of a Surveillance Authority and a Court of Justice regarding the interpretation of the Agreement on the European Economic Area (the 'EEA Aq;reement').

1 555650_1 TABLE OF CONTENTS t. TNTRODUCTION ..'...... ""' 4 A. Tur FtnsrQuEsrloN """'4

5 B. THE SEcoND Questtott """"""""""" il. NATIONAL LAW, FACTS AND MAIN PROCEED|NGS...... '..'.." .""""""""""' 6 6 A. ELEMENTS oF LAW """""

8 B. Euvrrurs oF FAcrs """"

10 C. MAIN PRocEEDINGsAND Qugsrtons """"""""""

L1 ilt. THE FIRST QUESTION - RESTR|CTION...... ' ."""""""'

A. ToTnI novTnIs|NG AND DISPLAY BANS ARE INHERENTLY DISCRIMINATORY AND THUS PER SE RESTRICTIONS OF 1-]- FREE MOVEMENT WITHIN THE MEANING OF ARTICLE 1"1 EEA....."' "..""

(a) Article 11 EEA Prohibits Measures that Are Capable of Restricting Free Movement...... '. 11

(b) lnherently Discriminatory Measures """'12

(d) The ban on Internet display is discriminatory'...... """""""""' 17

18 B. THE DISPLAY BAN Is A REsTRIcTtoN oN FREE MOVEMENT BECAUSE IT HINDERS MARKET ACCESS. ...'.....'...... '

(a) National measures that hinder market access of products from other EEA States constitute a restriction on free movement of goods within the meaning of Article 11'...... '...'.... 18

(b) Display bans hinder market access. """"2L

C. CoNcLUsroN oNTHE FtnsrQursrtoN ...... """""""""""22

lv. THE SECOND QUESTION -JUSTIFICATION ...... """""'23

A. THE GutDANcE To BE clvEN To rHE NATIoNAL Counr """"""""23

B. THE FUNDAMENTALS OF THE JUSTIFICATION ASSESSMENT '...... ,.23

C. CNTERIR FOR PROPORTIONALITY ASSESSMENT...... '27

(a) Criteria for Suitability ...'.....'.".' """""""' 28

(b) lnsuffipi of evidence adduced by the State...... '.'...... """" 30 D. CRrrrRtR FoR NEcEsstrY...... '.-.'...... '...... 42

(a) Obligation to examine less restrictive measures ...... '...... 42

(b) Less restrictive measures to reduce consumption of tobacco products ...... ' 44

(d) The WHO Framework Convention

E. Coruclusroru oN THE SEcoND Qurslolt.... '...... '. 55 INTRODUCTION products at the 1. This Case concerns the lawfulness of a ban on display of tobacco point of sale.

to a 2. The referring court has asked the EFTA Court (i) whether the ban amounts measure with equivalent effect to a quantitative restriction on the free movement deciding of goods under Article 11 EEA; and, if yes, (ii) what are the criteria for whether the ban is justified and proportionate under Article 13 EEA'

A. The First Question

display ban Nonruay has long banned tobacco advertisement and promotion; the goes even further, effectively foreclosing the only remaining means of market entry for imported brands not already familiar to local customers'

submits that, under 4. Philip Morris Noruvay AS, the Plaintiff in the main proceedings, the attached the case law, the restriction on free movement is plain: as stated in of Justice of opinion of sir Francis Jacobs, former Advocate General of the court reality, and the European Union, 'ff seems clear both in law and in commercial prohibition of the indeed as a matter of togic and common sense, that a general a serious visibte disptay of goods at the point of sa/e is a restriction - indeed restriction - on the free movement of goods.'l

to the Annex 1: Jacobs' Opinion on the questions which have been referred EFTACourtbytheosloCityCourt,datedl4January2oll. per restrictions on 5. First, under settled case law, complete advertising bans are se more the free movement of goods. such bans are inherently discriminatory, are detrimental to imported than to domestic brands with which local customers per se already familiar. lf, as the case law establishes, advertising bans are violations of free movement, then the violation is only clearer here: Noruvay or prohibits not only all advertising and promotion, but also even the mere display inspection of the product at the point of sale'

t At paragraph 8 of Jacobs' Opinion. o. Second, recent cases make clear that a measure that hinders market access for imported products is a restriction on the free movement of goods. A display ban, coming on top of a complete advertising ban, is such a measure because it imposes an insurmountable obstacle to any foreign manufacturer hoping to enter the Noruvegian market. With no way to communicate their brands to the local customers, manufacturers from other States will be severely hindered in even getting the existence of their products known, let alone in competing effectively with already established local brands.

7. Finally, the ban constitutes a restriction in another distinct respect: the new law prohibits Internet tobacconists from displaying tobacco products on their access- controlled websites, while permitting local tobacconists to display such products in their local brick-and-mortar shops. The case law makes clear that a law banning display by specialist Internet sites, while permitting display by local specialist shops, is discriminatory towards imported products and constitutes a restriction on trade under Article 11.

8. The Plaintiff submits that the first question should be answered in the affirmative. A negative answer would, in the words of Mr. Jacobs, be 'contrary to common sense'and, indeed, 'verge on the absurd. lt is contrary to the very structure and system of the EEA Agreement and of the EIJ Treaty.'2

B. The Second Question

o The Noruvegian State seeks to justify the display ban on grounds of public health. The referring Court has requested guidance as to the criteria for assessing the suitability and necessity of the display ban under Article 13 EEA.

10. This Court should make clear that, under settled law, the referring court must determine - and the State must carry its burden of proving - (i) that the measure actually achieves its purported health goals, r.e., that a display ban actually reduces conSumption of tobacco, and that such effects (if any) are not outweighed by the known adverse effects of tobacco trade restrictions (such as increasing illicit trade); and (ii) that the positive effects of the measure (if any) cannot be achieved through other measures less restrictive of EEA trade.

2 At paragraph 17 of Jacobs'Opinion. submits that 11. The State has offered no such evidence on suitability to date. Plaintiff where, as here, the experience of other States already demonstrates that tobacco nor display bans have no effect on consumption, such a ban is neither'suitable' 'necessary' to reducing the consumption of tobacco products; in any event, this of Court should make clear that it is the State's burden to overcome the weight its claims; contrary evidence with substantial scientific evidence in support of justified based on restrictions on trade already shown to be ineffective cannot be mere hope or sPeculation.

To the 12. Nor has the State met its burden with respect to 'less restrictive measures.' efficacy of contrary, the Noruvegian authorities have repeatedly acknowledged the enforcing less restrictive alternatives, such as tobacco retail licensing and actually performance the ban on underage tobacco sales. Norway has one of the worst records on enforcement of minimum age laws in Europe: retail sales of tobacco products to youth are rampant. Yet Norway has repeatedly ignored the recommendations from its own health officials to adopt measures to enforce prove, and ban on such sales. This Court should make clear that the State must effective the referring court must determine, that such measures would not be as products' (Plaintiff as a display ban in reducing youth consumption of tobacco because the submits that the State cannof meet its burden, and seeks to evade it, do empirical evidence already establishes that retail licensing requirements reduce youth consumption and that display bans do not')

II. NATIONAL LAW, FACTS AND MAIN PROCEEDINGS

A. Elements of law

products 44, Ban on all advertising: Nonrvay has banned all advertising of tobacco of all for over a quarter century. The law, passed in 1974, banned advertising point sorts, including at the point of sale. The law expressly permitted of sale display of tobacco.products that had no advertising effect, I'e., that were

' appropriate for ration al sa/es.'3

pursuanttothe ban on . *r*,1"" *t* october 1974, section 1(7): 'lnsofar.agtiuile-s-are prohibited g.March 1973 on restrictive measures related advertising under^," Section 2 paragraph (1) and Q) in Act No. 14.of of Social A.ffairs-pursuant to fo fhe sa/es of tobacco products etc., cf. the regitations passed by the.Ministry -..) 7. The displav of products secfion 8, cf. section r fil in tne nit, ixiieptions shatl'appty.to: .tobacco iiiiiiipi section 8(5) provided that the 'exception at points of sale insorarii,e- iisitay' ii appropriate fotr ihe rationa!sa/ei.' by virtue of their size or design, will produce an does not apply to equipitent for tie po'sitioning of goods which, advertising effect.' 14. Ban on display: In April 2009, Norway added a total ban on display of tobacco products at the point of sale. Regardless of whether the display was 'appropriate for rationalsales, 'the new law bans any display of packages or trademarks at the point of sale. Customers may be given only a neutral price list without trademarks or product information.

15. The ban entered into force on 1 January 2010. The relevant provision reads:

$ 5. Prohibition against the visible display of tobacco products and smoking devices.

The visibte display of tobacco products and smo4ing devices at retail outlets is forbidden. The same applies to imitations of such products and to token cards which give the customer access to acquire tobacco products or smoking devices from vending machines'

The prohibition in the first paragraph does not apply to ded icated tob acco b o utiq u e s [tob acco n i sts].

At the retail outlefs ff is allowed to provide neutral information regarding the price and which tobacco products are for sale at the premises. Ihe same applies to smoking devices.

The Ministry can through regulations provide for rules on the implementation and supplementing of these provisions and provide exemptions from such.

16. The Health Directorate responsible for enforcing the ban has issued a so-called 'implementation letter.'a This letter states that 'Websites that sell tobacco products and smoking equipment are not covered by the exemption for tobacconisf shops''

17. Adult access to tobacco products in Norway today: Under the ban, tobacco products cannot be shown in any form at retail locations, even at the request of an adult customer. In the locations where the vast majority of tobacco products are sold, an adult smoker seeking to purchase cigarettes is not allowed to see or inspect the range of products available.s An adult smoker seeking to buy cigarettes online cannot view available tobacco products even on a specialized i:"' tobacco website with verified age-controlled access.

a Circular letter to retail outlets for tobacco and others of 1 September 2009, available at www.tobakk.no. 5 Although display is permitted at specialized shops exclusively selling tobacco products, most Nonvegians have no acceis to such a shop (there are only flve to ten such shops in the entire country). 18. ln short, by law, Noruvay has eliminated the use of brands in advertisement, promotion or sale of cigarettes. By prohibiting even the visual display or inspection channel of of tobacco products at retail, Noruuay has foreclosed the only remaining and communication for a manufacturer to present lawful customers with brand product availability and identifying information. Under such a ban, adult consumer choice can be based only on previous experience with brands already established been in the local market; in Norway, as in other jurisdictions, the market has shaped historically, and remains dominated, by local brands, customs and preferences.

19. The importance of brands in laMul modern markets has long been recognized' factors The EU Commission has stated that branding is one of the 'most important of Justice for the ability to compete effectivety in the tobacco market.'6 The Court has agreed and has consistently held lhal'trade mark rights are an essential element in the system of undistorted competition which the Treaty seeks fo estab/ish and maintain.'7

B. Elements of facts

20. Manufacture of tobacco products in Norway and local brands: As in other jurisdictions, the Nonruegian tobacco market is mature: tobacco products were introduced over a century ago; sales peaked and began declining many years to ago. Even as the market declined, local and international brands continued gained compete for customer preference; imported brands were introduced and market share at the expense of local brands'

and 21.lnNonrvay, as in other jurisdictions, local and regional companies developed produced local brands catering to local preferences and habits. These local brands achieved and maintained dominant shares of the local market. Some local (and brands expanded into neighboring markets such as Denmark and Sweden vice versa).

produced 22. Localmanufacturers in Nonruay, such as Rose Tobacco and Petterge's, and marketed a wide range of tobacco products. As is common in a maturing market, both companies Were eventually purchased by another local

6 Case COMP/M.4581 - lmpeial Tobacco/Altadis, at paragraph 68' t Case C-10/89 HAG tt t1990lECR 3711,a|paragraph 13' manufacturer, Tiedemann's. Tiedemann's was in turn taken over in 1998 by then regional market leader Scandinavian Tobacco Company. Scandinavian Tobacco was in turn taken over by British American Tobacco in 2008. Although BAT subsequently closed the Nonruegian production plant and there is currently no local manufacturing, traditional Norwegian brands continue to be sold almost exclusively in Nonruay.

23. ln spite of these changes, long-established local brands dominate the Noruvegian markets for both the roll-your-own (RYO) products and for factory manufactured cigarette (FMC) brands.

24. For example, according to the Nonruegian trade mark register, the first registration of Tiedemann's for tobacco products dates back to 1885. The first registration of Petterse's dates back to 1927.8 These two brands together hold market shares currently totaling 90 per cent of the RYO market.e

25. Similarly, for factory manufactured cigarettes, the local brands that have the strongest market position in Nonruay have also been produced and marketed locally since the late sixties. For example, the Prince brand, produced for many years in Nonruay, now has almost 40 per cent of the Nonruegian market.lo Prince has little presence outside the Nordics. Even after actual production was shifted outside the country, Prince continues to be perceived as a local Norwegian brand.

26. Nonruay's experience is, in key respects, typical: in each country, long established local habits and preferences have shaped the mixture of local and international brands unique to that country. Local brands popular in one country are often little known internationally. Similarly, international brands that are popular in one country may have a very small market share in a neighboring country. Inter-brand competition in this declining market therefore remains fierce, with local brands competing to preserve or expand market share, and imports competing to take market share from locally established brands and from other imported brands. The fight for market share, especially where the overall market is in decline, is vital to the competitors in such markets.

o The trade mark register is available at https://d bsearch2. patentstyret.no/AdvancedSearch. aspx?Category=Mark. t Data provided by Markedsfakta AS, an independent supplier of market data. 10 Id. 10

have imposed 27. Display bans in other jurisdictions: only a handful of countries tobacco display tobacco product display bans. As demonstrated below, the ban of consumption in general in those countries has had no impact on reducing tobacco

or among Youth in Particular.

ban almost identicalto the 28. ln Finland, the government initially proposed a display Noruvegianban.TheConstitutionalLawCommitteeoftheFinnishParliament, restrictive and however, concluded that the proposed ban was unnecessarily the Finnish therefore disproportionate. Although the ban remains disproportionate' of tobacco brands legislature reduced slightly its severity by permitting the display been included in the in catalogues at the point of sale. Similar provisions have extreme ban does not bans adopted in lreland and the uK. By contrast, Noruvay's products' permit any use of brands in connection with lawful sales of the

such bans last 29. sweden and Denmark reviewed and decided not to introduce year, citing the lack of evidence that such bans are effective'11

c. Main Proceedings and Questions

the Oslo City Court to have the 30. The Plaintiff brought an action in Nonirray before of goods' ban set aside as contrary to European law on the free movement

be referred to the EFTA a4 The Plaintiff suggested that key EEA questions should arguing that court. The Defendant, the Nonruegian state, opposed the reference, the case the EFTA Court was not competent to give a ruling on the matter since was'factual'.

questions: 32. The oslo city court nevertheless referred the following

to mean that a 1 . Shatt Articte 11 EEA be understood generalprohibitionagainstthevisibledisplayoftobacco "products consfffufes a measure with equivalent-effect to a 'quantitativerestrictiononthefreemovementofgoods?

27May2010,concerningapropositionforprohibitingthevisibi|ityoftobacco ;W16 counties who (Bertel ff do not believe that the few in sates outlets. The Minister of Health ""i'O"iiif"t"lal haveimplementedsomethingsimilarcandocumentanyspect!rce{99!.,Thedebateisavai|ab|eat http://www.ft.dt

33. The total ban on the visible display of tobacco products constitutes 'a measure with equivalent effect to a quantitative restriction' on the free movement of goods

within the meaning of Article 1 1 EEA, for the following reasons.

94. First, under the established principles of European law, a total ban on advertising is per se a restriction on free movement because it is inherently discriminatory, operating to the particular detriment of imported products. The display ban places imported products at even greater disadvantage than the advertising bans held by the Court of Justice of the Union to be per se discriminatory. See Point A below.

35. Second, recent cases emphasize the fundamental market access basis of the free movement requirement and make clear that any measure that hinders market access for products originating in other EEA States is a restriction. A total ban on all product display unquestionably hinders market access: no product originating in other EEA States can successfully enter the Nonruegian market when it cannot be advertised, promoted or even displayed on shelves at the point of sale. See Point B below.

A. Total advertising and display bans are inherently discriminatory and thus per se restrictions of free movement within the meaning of Article 11 EEA.

(a) Article'11 EEA Prohibits Measures that Are Capahle of Restricting Free Movement.

36. Article 11 EEA provides that'quantitative restrictions on imports and all measures having equivalent effect shall be prohibited between the Contracting Parties.' Under the classic Dassonville formulation defining 'measures having equivalent effect'under the parallel Article 34 TFEU, 'all trading rules enacted by Member Sfafes which are capable of hindering, directly or indirectly, actually or 12

as measures having potentially, intra-community trade are to be considered

stri cti o n s''12 e q u iv a I e nt effect to q u a ntit ative re

also to the potential effects g7. Article 34 applies 'not only to the actual effects but simpty because at the of the legistation. lt cannot be considered inapplicable to another Member present time there are no actualcases with a connection in fact has an effect equivalent Sfate.'13 The question is not whether the measure or at a particular point in time' to a quantitative restriction in a particular state capable of having such effects' Rather, the question is whether the measure is

it lf a national measure is capabte of hindering imports an ,it be regarded as a measure having effect ,. equivalent to a quantitative restriction, even though-the possible for hindrance is siignt and even though it.is imported products to be marketed in other ways"

res' (b) I nherently Disc ri m i n atory Measu

33.TheCourtofJusticeinKeckqua|ifiedtheapp|icationofArtic|e34asfollows:

Member Sfafes of [T]he apptication to products from other 'nitiorit p-yrsions restricting or prohibiting certain sglling indirectly, ui"ngrr"nfs I's not such aJfo hinder directty or within i,ctuity or potentiilly, trade betvlegn Member Stafes 'Dlassonvitte (C.ase 8n4 lne meaniig of tie iudgment ,n9741 to all relevant ECR 837), so tong as fhose provisions apply Io ng ng"witn i n th e n ation al te rritory a nd.so tia iperati fagt tn"y"rt affect in thesa'ne manner' in law an! in from ""the marketing of dome-stic products and of those other Member States.ls has made clear that 39. ln the case law following Keck the court of Justice free movement of goods advertising bans constitute a per se restriction on Advocate General prohibited by Article 34. In his opinion in Leclerc-srp/ec Jacobs explained why that must be so:

may totat ban on the advertising of a product whic.h [A] is 'i;,unruny be so/d in the Member state where the ban lie outside the npoi"a and in other Member stafes cannot effect of of Arlicle 3,0 [now Article 34 TFEU]' The ",riopu

R 837' at paragraph 5'(emphasis added)' ECR l-6197, at paragraph 17' (emphasis added)' ,. Case C-1B4lgO Commissionv France (Foie Gras) [2000] also 1797, at paragraph 13 (emphasis added)' See 1a Joined Cases 177 and 178182 Van de Haarll984lECR ECR 649' Case QAftT Rewe-Zentral (Cassr's de Diion) [1979] l-6097, at paragraph 16 (emphasis added)' 15 Joined Cases C-267l91 and C-268tg1Keck [1993] ECR 13

such a ban would be that manufacturers in other Member Sfafes would find itvirtually impossible to penetrate the market in which the ban was imposed, if their products were not already known to consumers in that country. A measure that constitutes such a significant barrier to the entry of goods from other Member Sfafes must surely be equivalent in effect to a quantitative restriction on trade between Member S/afes. Even if the discrimination fesf formulated in Keck were applied, the same conclusion would be reached: an adverlising ban, far from being neutral in its effects, fends to^operate to the pafticular detriment of imported goods.'"

40. ln Gourmef the Court was confronted with just such a total advertising ban, for alcoholic products.lT The Court ruled that, even though the ban did not, on its face, discriminate against imported products, a complete advertising ban was liable to have a discriminatory impact on imported goods and therefore amounted to a restriction on the free movement of goods:

18. lt should be pointed out that, according to paragraph 17 of its judgment in Keck and Mithouard, if national provisions restricting or prohibiting certain selling arrangements are to avoid being caught by Article 30[now Article 34 TFEUI. of the Treaty, they must not be of such a kind as to prevent access to the market by products from another Member Stafe or to impede access any more than they impede fhe access of domestic products.

20. lt is apparent that a prohibition on adveftising such as that atissue rn the main proceedings not only prohibits a form of marketing a product but in reality prohibits producers and impofters from directing any advertising messages at consumers, with a few insignificant exceptions.

21. Even without its being necessary to carry out a precise analysis of the facts characteristic of the Swedish situation, which it is for the national court to do, the Court is able to conclude that, in the case of products like alcoholic beverages, the consumption of which is linked to traditional social practices and to local habits and cusfoms, a prohibition of all advertising directed at consumers in the form of advertisements in the press, on the radio and on television, the direct mailing of unsolicited material or the placing of posfers on the public highway is liable to impede access to the market by products from other Memher Sfafes more than it impedes access by

'u Opinion of Advocate General Jacobs in Case C-412193 [1995] Leclerc Srp/ec ECR l-179, at paragraph 50 (emphasis added). tt Case C-405/98 Gourmet t20011 ECR l-1795. 14

domestic products, with which consumers are instantly more familiar.ls

on free 41. The court held that a total advertising ban constitutes a restriction ban on movement of goods without having to analyze the factual effects of the the the particular national market in question. The court rejected as irrelevant appear to be Swedish government's argument that the imported products did not conclusion adversely affected by the ban, stating that this did not alter the court's concerning 'the imbalance inherent in the absolute prohibition on direct advertising.'1s

'advertising ln Douwe Egberts,the Court confirmed that national rules banning the characferisfrcs of a producf'are liable to favor domestic over imported of products and therefore constitut e a perse restriction on the free movement goods prohibited by Article 34. Reasoning again as it had in Gourmef, the Court held:

the 53. [A]n absolute prohibition of advertising charicteristics of a product is liable to impede access tothemarkethyproductsfromotherMemberSfafes morethanitimpedesaccessbydomesticproducts' with which consumers are more familiar'

54.Theprohibitionlaiddownbythenationallegistation therefore constitutes a fetter on intra-community trade comingwithinthescopeofArticte2sEC[nowArticle34 TFEUI.'"

conclusion that 43. ln Douwe Egberts as in Gourmef, the court reached the analyze the advertising bans were inherently discriminat ory without the need to actual effects on the national market.

inherently 44. under Douwe Egberts and Gourmef, advertising bans are discriminatory; they are therefore measures with equivalent effect to a quantitative restriction on the free movement of goods. Commentators have be agreed with both cases: 'total bans on adveftising are considered to discriminatory Per se.'21

18 /d. lemphasis added). ln Id.alparagraph 24 (emphasis added). ,o Case C-23gtO2 Douwe Egbefts [2004] ECR l-7007 (emphasis added). Direction?', (2010) tl peter Oliver, Of Trailers and Jetskis:/s fhe case law on Article 34 TFEU Huttting in a New Case Note on Gourmet, (2002) 39 33 Fordham lnternational Law Journal 1423, at1470. See also G. Straetmans: 15

45. The momentary absence of domestic production of tobacco in Nonruay does not render the perse rule of Gourmet inapplicable. To the contrary, the Court of Justice has declined to rule that Article 34 ceases to apply in the absence of domestic production in the importing State. The Court has, instead, held that the absence of domestic production is irrelevant to the applicability of Article 34; the Court has also held, more recently and more pointedly, that the absence of domestic production means that a challenged national measure disadvantages only imported products and therefore constitutes a discriminatory restriction on free movement prohibited by Article 34.

46. In the Greek lnfant Milk case, the Commission sought a declaration that Greece had infringed Article 34 by requiring that processed milk for infants only be sold by pharmacies. There was no domestic production of infant milk in Greece; the Court, however, refused to make the applicability of European law dependent on such a fortuitous circumstance." The Court held:

The fact, invoked by the Commission, that the Hellenic Republic does not itself produce processed milk for infants does not undermine those findings. The applicahility of Article 30 [now Article 34 TFEU] of the Treaty to a national measure for the general regulation of commerce, which concerns allthe products concerned without distinction according to their origin, cannot depend on such a purely fortuitous factual circumstance, which may, moreover, change with the passage of time. lf it did, this would have the illogical consequence that the same legislation would fall under Article 30 in certain Member Sfates but fall outside the scope of that provision in other Memher Stafes.23

47. In the subsequent Morellato case, the Court went further, ruling that the absence of domestic production meant that a national law concerning the product necessarily worked to the disadvantage only of products from other Member States; as such, the law was discriminatory and thus prohibited by Article 34. As the Court explained:

ffihere there is no manufacture of the product at issue in the Member Sfafe of import, such a requirement, although it applies without distinction, disadvantages imported

Common Market Law Review 1407, at 1414, and Andrea Biondi, 'Advertising alcohol and the free movement pinciple: the Gourmet decision', (2001) 26 European Law Review 616, at 620.

" Case C-391192 Commission v Greece t19951 ECR l-1621. '" Id alparagraph 17 (emphasis added). 16

productsonly,inthatitdiscouragestheirimportormakes the fhem /ess aitractive to the final consumer. lf that were case,whichitisa|soforthenationalcourttodetermine, thatreqtuirementwouldconstituteanobstacletoimports andwoutdthereforebecaughtbytheprohibitioninArtic|e 30 of the TreatY'24

point: 48. Jacobs' Opinion summarizes the law on this

ttisctearthatinthepresenfcasethegeneralprohibitiono.f visinJJiip,tiy or gooas affects imports more than domestic products.'tndeealnat witt be true generally.of such ,""riir", whether or not there is domestic production. wneri inereis domesfic production, then a prohibition of visibte display is tiabte to affect imports more severely, because suih restrictions inevitably tend to protect domesticproductionandtodisadvantagemanufacturers tocatedinotherMemberSfafes.|fontheotherhandthere to be the ,s no io,iestic production, then there would seem most extreme iorm of discrimination' b^e-cause the proniiition exclusively affects imports'25

Milk or Moretlato, the result here 49. Regardless of whether the court follows Greek is inherently discriminatory is the same. A ban on all advertising and promotion absence of domestic under Gourmet and Douwe Egbeft, and the momentary the finding of production is either not relevant under Greek Milk or supports discrimination under Morellato'

(c) Display hans and discrimination constitute a per se restriction on 50. The rule recognizing that total advertizing bans at issue here' Noruvay free movement applies a foftiorito the total display ban complete advertising ban' has implemented its display ban as an extension of its means of The addition of the display ban eliminates the only remaining products to local consumers' communicating brand characteristics of tobacco

under the reasoning of the 51. The display ban therefore is inherentty discriminatory detrimentalto foreign Gourmet-Douwe Egbertcase-law, because it is even more an advertising ban' entrants than the advertising bans in those cases. with at the point of sale' consumers could see and inspect and choose new brands

"[2003]EcR|-9343,atparagraph37.Seea|sotheopinionofAdvocateintignificant' domestic production it was General Mengozzi in Ker-aptika, at paragraph oz, witn 'utt"rty ^n states of the European lJnion" case c- ,obvious that the prohibition affects mainly proaucrs from other Member yet reported' lOAtOS, X""Opfrka, ruling of 2 December 2010' not 25 Jacobs' Opinion (attached as Annex 1) at paragraph 14' 17

The display ban forecloses this last line of communication and makes the market entry of imported brands virtually impossible.

52. Furthermore, the display ban is in fact discriminatory in favor of local brands. Local brands dating back as far as 1885 (trademark registration for Tiedemann's tobacco products) continue to have a very strong presence in Nonrvay due to locally developed habits and customs; these local brands compete vigorously in the market. The ban works to the detriment of new imported brands with which local consumers are not familiar. Although there is currently no domestic manufacture of tobacco products in Nonruay, there was local manufacturing until as recently as 2008 and there may be so again. That is an arbitrary and, again, irrelevant circumstance.

(d) The han on lnternet display is discriminatory

53. There is another clearly discriminatory aspect of Nonaregian law: the ban applies to specialist Internet websites exclusively selling tobacco to adult consumers but does not apply to specialist tobacconist shops. Specialist retailtobacconist shops catering to adults in Nonruay can display tobacco products for their customers. Specialist retailtobacco websites catering to adults cannot display tobacco products for their customers.

54. The Court of Justice held in Doc Morris 'u that unequal treatment of sales over the Internet qualifies as indirect discrimination of imported products and thus as a measure with equivalent effect to a quantitative restriction:

74. A prohibition such as that af issue in the main proceedings is more of an obstacle to pharmacies oufsrde Germany than to those within it. Although there is little doubt that as a result of the prohibition, pharmacies in Germany cannot use the extra or alternative method of gaining access to the German market consisting of end consumers of medicinal products, they are still able to sell the products in their dispensaries. However, for pharmacies not established in Germany, the internet provides a more significant way to gain direct access to the German market. A prohibition which has a greater impact on pharmacies established outside German territory could impede access to the market for products from other Member Sfafes more than it impedes access for domestic products.

75. Accordingly, the prohibition does not affect the sale of

'u Case C-322t01 Doc Moris t20031 ECR l-14887. See also Case C-108/09 Ker-Optika, ruling of 2 December 2010, not yet reported. 1B

domestic medicines in the same way as it affects the sale of those coming from other Member Sfafes' to show their similarly here: Although Norwegian tobacconists are also unable products in their products in online websites, they are able to display tobacco a more significant stores. For tobacconists outside Noruvay, 'the internet provides the ban on display of way to gain directaccesszT to the Nonrvegian market. Thus, products on adult-restricted web-sites is more of an obstacle to tobacconists outside Norway than to those within it'

because it hinders B. The Display Ban is a restriction on free movement market access.

products from (a) Nationat rneasures that hinder market access of of other EEA States constitute a restriction on free movement goods within the meaning of Article 11' that national measures The court has recently made clear in Trailers and Jetskis amount to a that hinder market access of products from other Member states concerned bans or restriction on free movement of goods.28 In both cases, which to clarify more restrictions on the use of a product, the Court took the occasion Court generally which sort of measures come within Article 34 TFEU. The in the cases received differing views from the Advocate Generals involved - including strong criticisms of KecKs categorical approach'

concerning the need for 57 Advocate General Bot provided influential comments clarification:

77. The Keck and Mithouard iudgment caused puzzlement', c-o d i cti o n s co ntai n e d M a ny co m m e nt ators re g rette a ti e ntra in itZnd its tack of reasoning and of clarity' The gave implementation of the criteria set out in that iudgment riie to numerous difficutties of interpretation which the possible to court has had to confront and which it has been resolve only on a case-by-case basis' case- 78. t shatt consider, in particutar, two criticisms of that law.

79. First, I think, as do others before me, that a distinction

'7 Id. 28 l-519 and Case C-142105 Mickelsson & Roos Respectively Case C-1 1 0/05 Commission v ltaly 120091ECR 120091ECR t-4273. lo

between different categories of measures is nof appropriate.

80. Whilst it is legitimate to try to develop presumptions regarding the effects of various categories of measures on the market, the existence of a restriction may also depend on other factors, such as the way the relevant rules are applied and their specific effects on trade.

81. The distinction made by the Court may therefore be artificial and the demarcation line between fhose different categories of measures may be uncertain. ln some cases, the Court describes rules on product characterisfics as 'selling arrangements'. ln other cases, it treats measures concerning selling arrangements for goods as rules concerning product characteristics. That applies, in particular, to rules governing advertising where they have an effect on the packaging of the product. Finally, it may happen that the Court abandons that distinction and makes an analysis based only on the effects of the rules. Ihose examples demonstrate the difficulties which the Court may encounter in classifying ceftain measures. lt is therefore, in my view, difficult to work on the basis of categories when, in practice, national courts and the Community iudicature may be confronted with very different rules, which they musf assess having regard to the circumstances of each individualcase.

82. Second, by identifying new criteria and establishing a different approach depending on the type of measures involved, that case-law gave rise to differences in the way that restrictions on the free movement of goods are viewed by comparison with the rules applicable to other freedoms of movement.

83. As we shall see, the view taken of restrictions on those various freedoms displays the common feature that it is based on a single criterion, that of access fo the market. However, to adopt a different approach in the area of free movement of goods is not, in my view, consistent with the requirements inherent in the construction of a single European market and the emergence of citizenship of the Union.

84. In the light of the foregoing, ff seems to me that the fesfs /aid down by the Court in Keck and Mithouard have not clarified the scope of Article 28 EC or facilitated the implementation of that afticle.'" tn Opinion of Advocate GeneralBot in Case C-110/05 Commissionv ltaly (Trailers) [2009] ECR l-519 (emphasis added). See also the Opinion of Advocate General Geelhoed in Case C-239102 Douwe Egberts, at paragraph 71 (emphasis added): 'lf a certain form of advertising is indeed the only effective means of penetrating a ceftain market or if there are set paftems of consumption in the national market, prohibiting advertising will always seiously impede access fo the market for products from other Me,mber S/afes. To my mind, fhis r's a/so true of a products have been lavvfully manufactured and mafueted in other 'Memberprohibition of the advertising of new which States. Pubticising such products is essenfia/ if a market posrtion ls to be gained. Ihis is not altered by 20

the requirements for 58. In Jefskrs the Court accepted these suggestions, and stated restrictions on free movement without drawing distinctions for'selling arrangements.' Rather, the court held, the fundamental question is restrictions on market access:

tt must be borne in mind that measures taken by a Member Sfafe,theaimoreffectofwhichistotreatgoodscoming fromotherMemberSfafeslessfavourablyand,inthe absence of harmonisation of national legislation, obsfac/es to the free movement of goods which are the consequence ofapplying,togoodscomingfromotherM,emberSfates whereiniy manufactured and marketed, rules thatlaydownrequirementstobemetbysuchgoods,eYe|"ritawfulty if those rutes apply to a|l products alike, must be regarded as,meas|Jreshavingequivalenteffecttoquantitative restrictions on imports' for the puliposes of Article 28 EC -'. Anyothermeasurewhichhindersaccessofproducts originating in other Member sfafes to the market of a MemberSfafe is also covered by that concept "'30

or effect of 59. ln sum. the Court made clear that (i) rules that have the aim for discriminating against imported goods, (ii) rules that lay down requirements goods the market imported goods, and (iii) rules that hinder access of imported to prohibited by of a Member State - all these are restrictions of free movement Article 34 TFEU and likewise by Article 11 EEA'

well 60. The ruling in Jefskis as well as the equivalent ruling in Trailers have been in which 'fhe received in legal literature, which sees the cases as marking a shift, on free one and the only decisive criterion'for cletermining restrictions are doUbts, movement is'market access.'31 Jacobs' Opinion summarizes'-'There sfafed in Keck especiatty in the tight of recent case-law, about whether the law as

into the market of similar the fact that such a prohibition is as much of an obstacte to the introduction is decisive is that the new products i"ri"ted in ihe.Member.State,c-o_il?ri!!;Y!at ';;;;;;;;;; )iiii"r-m"rberStare^"ruailul"i-inJ is prevented from gainins access to the market; 30 /d. at paragraph 24 (emphasis added, (internal citations omitted' Good Bye, Kecky Mithouard!" ., See, e.g.,LuzGonzillezVaqu6, 'La sentencia Michelssony Roos del^TCJE: Keck?: A Comment on the (2009) Revista espanota oe Derecho Europeo 389, and Peter Pecho, 'Good-Bye (2009) 36 Legal lssues of Economic lntegration 257' Remarkable Judgment in Commission v. Iialy, C-iiO1OS', paragraphs.35 and 36 to the distinction pecho states at2GZ:'(...) tn" io,*^ented iudgmert yoitir"l l"fers in tls case the past fifteen years under between seiling arrangements and product ,"qrir"i"nt", as rt was the diing from such a distinction in its paragraph the Keck rule, but on the other hand, it takes uruy io'""ible substance "it disciminatory measures' commerce jl. f tne concept of measures of equivalent effect is supposed to.coue.r market access to Community restictive proauct cnariiten"tot, ub well as all other measures fhaf hinder the defined in paragraphs 15 goods, why would it stittii iece,isary to distinguish between the measures respectively v ltaty is sufficiently clear so that it is possible to and 16 of Keck? rne roiutition or paragrapisi,i in Commission the Articte 28 conformity of selling conclude that the one atnd the onty deiisive criterion for examining anangements is mafuetaccess.' (emphasis added)' 21

is sf// correct. ln much of the academic debateif r's suggested that the Court of Justice has shifted in the direction of the test of restrictions on market access.' "

61. The standing of Keck need not be resolved here: a total ban on display is a restriction on the free movement of goods under Keck, Gourmet and Douwe Egbert because it is inherently discriminatory, and under Jefskis and Trailers because it hinders market access of imported products.

(b) Display bans hinder market access"

62 The display ban hinders market access to products from other EEA States under the Traiters/Jefskis case law. The ban effectively forecloses one part of the EEA to the entry of new brands from other EEA States.

63. The impact of such restrictions on tobacco market access is well recognized. The European Commission has noted, for example, that even without the display ban, 'restrictions in adveftisements and promotions of tobacco products ... make it very difficult for manufacturers to develop recognition of new brands.'33 As the Commission observed ,'in this respect, BAT, an established competitor, has been unsuccessfut in introducing its internationally known brand 555 into the United Kingdom, despite sig nificant efforts.'34

64. ln almost every meaningful respect, Nonivay effectively prohibits the use of

brands rn the normal course of commerce and thus hinders introduction of brands from other EEA States to the Nonruegian market:

(i) no advertising of brands is allowed;

(i i) no display of brands on packaging is allowed in shops;

(iii) no display of brands is allowed on price lists;

(iv) no display of brands is allowed on vending machines;

(v) no display of brands is allowed on the token cards to acquire products from vending machines;

32 Jacobs' Opinion (Annex 1) at paragraph 12. tt Case COMPlM.2779 - tmperial Tobacco/Reemtsma Cigarettenfabiken, at paragraph 54. 3a Likewise, since the lrish display ban came into force, Philip Morris Ltd. has introduced its internationally known brand L&M with lack of success to date as retailers are reluctant to stock il because they do not have any tools available to communicate the existence of that brand to adult smokers' 22

they (vi) no display of brands is allowed on websites even though and only selltobacco products to adults' ur" ""."r, controlled any Even more than the advertising ban, the display ban, which eliminates not impossible possibility of brand communication prior to sale, makes it difficult if penetrate and for imported products that are not familiar to local customers to the essential compete effectively in Nonivay. The commission has emphasized function of trademarks in tobacco competition:

Giventheadvertisingbansandrestrictionsimposedon promoting of tobacco products, the brand is the key with the final customer. ln the absence of "o.muii"atortraditionat marketing, and considering the regulated nature ofthetobaccodistributiontogetherwithaverylowdegree oftechnicalinnavationsoftheproducts,fheaccessfolP (brand) and know-how (mainly related to blend compo'sition)aremostimportantQctor;fortheabilityto compete effectively in these markets'""

which deprives Advertising bans make market entry very difficult; a display ban, effectively importers of the last'key communicator with the finat customel, by hindering forecloses market entry of foreign brands altogether. Such a ban, entry market access in the most extreme Way - making a successful market prohibited by practically impossible - is a restriction on free movement of goods Article 11 EEA.

c. Gonclusion on the First Question

first question referred in 67. It is submitted that the EFTA Court should answer the the following terms.

general Articte 11 EEA must be understood to mean that a prohibition against the visibte display of tobacco products consfrtufes a measure with equivalent effect to a quantitative restriction on the free movement of goods'

M-ImperialTobacco/Altadis,atparagraph68(emphasisadded). rv. THE SECOND QUESTION _ JUSTIFICATION A. The Guidance to be given to the National Court

68. The referring court has requested guidance in the form of criteria for performing the justification or 'proportionality' assessment. Under settled case law, the EFTA Court should give the referring court as much guidance as it possibly can.36 '!n this regard, it is important for the Court of Justice to draw attention to particular enquiries the referring couri might need to make in order properly to exercise the review of proportionatity with which it is entrusted.'37

69. ln Gourmef and in Pedicelthe Court of Justice of the Union and the EFTA Court respectively left the whole proportionality assessment to be made by the national courts without appreciable guidance. The diverging results could not be reconciled. The Swedish Marknadsdomstolen found the advertising ban disproportionate. The Nonvegian Hoyesterett considered the Swedish court's

proportionality ruling incorrect de iure,38 and upheld the exact same ban.

7A. Such conflicts work against the fundamental objective of the EEA Agreement: to ensure the homogeneous application of the rules pertaining to the lnternal Market throughout the EEA. To provide a foundation for the development of consistent EEA law, this Court should lay out in full the criteria for the proportionality assessment, explaining the fundamental legal requirements and the manner in which those requirements should be applied here.

B. The Fundamentals of the Justification Assessment

71. Guidance for the justification review under Article 13 EEA should begin with fundamentals, including suitability and necessity:

tu See for instance the Case C-73\OB Bressol ruling of 13 April 2010, not yet reported, at paragraph 65. 3t Opinion of Advocate General Poiares Maduro in Case C-434104 Ciminal proceedings against Jan-Erik Anders Ahokainen and MatiLeppik, [2006] ECR l-9171, at paragraph 32. tu Supreme Court Report [Retstidende] 2009 p. 839, at paragraphs 40-41. 24

a legitimate objective, the state 72. suitability: under settled case law, assuming measure is actually must prove that the restriction is suitable, r.e. that the pursued.3e appropriate for securing the attainment of the objectives

the precedents from As Advocate General Poiares Maduro stated in summarizing must indeed contribute the court of Justice, to be suitable, fhe measure af issue ao to achieving the aim Pursued'-

Thequestiontobedeterminedinapp|yingthesuitability for the fesf rs whether the measure has any benefits at all tegitimaternferesfsonwhichtheMemberSfaterelies. Whenthl.sisnotthecase,themeasureinfringesby p o o n al defi n iti o n th e p ri n ci p I e of p ro rti ity'"

this reasoning, holding that the 74. The court of Justice has tracked and foltowed measures have proportionality test requires an examination of 'whether those damage to public health''a2 been able, even if onty partiatty, to put a hatt to the ... has no apparent effect, the Where, aS here, the evidence shows that the ban of that obiective"a3 measure 'must be considered unsuitable for achievement

the state's objective is an 75. The suitability of a particular measure for achieving is properly rejected if inherently empirical matter; suitability of the measure evidencetosupportitislacking.Here,thegovernmentmustbeab|eto sound scientific demonstrate the suitability of the display ban by submitting prevalence' the srne evidence that the ban will result in the reduction of smoking qua non of all public health goals in tobacco regulation'

The state must prove, second' 76. Necessity and the less restrictive measures: for meeting the aims or that the restrictions are no greater than necessary i.e', that: overriding requirements of genera| pub|ic importance,

ffiaybejustifiedo1lyb.voneofthepub|ic-interestreasons|aiddowninArticle34orbyaneCn f ZOf g ntwe'Zt'frat C"tis at Oiion I lteZgl overriding requirement accepted by the Court: C"t" f """ for securing the attainment of that objective and 64g, at paragraph g). The national provision musiul appropriate inttunce joined bases C-388/00 and C-429l00 not go beyond what is necessary in order to attainlt, t,iJioi l-5 845, at p ar agr aph 42' n at ii o si stem i t20021 EC R Anders oo Ciminal proceedings against Jan'Eik Opinion Advocate General Poiares Maduro in Case C-434104 paragraph 24' nni?ainen and Mati Leppik, [2006] ECR l-9171, at o' Id. (emphasis added.) Ahokainen and Mati Leppik [2006] EcR l-9171' o, case c-434104 Ciminal proceedings against Jan-Eik Anders Kingdom ECR 203' at paragraph 32' at paragraph 39; see also Case 12q181 Commisiio, u lJnited [1983] paragraph 47' " Case C-17O1O4 Rosengren [2007] ECR l-4o71, at could not be met 'by[T]hose aims or overriding requirements measure.s less restrictive of intra-Community trade.aa

77 Thus, even if a measure is suitable - even if it reduces tobacco consumption - the measure still fails the proportionality test if the State is unable to show that the same benefit cannot be met by some less restrictive means.

78, Strict construction: Under settled case law, including the EFTA Court's ruling in pedicel, the justification requirements under Article 13 EEA must be strictly construed:

The EFTA Court has consistently held that Articles 13 and 33 EEA must be interpreted strictly, as they constitute derogations from the basic rules that all obstacles to the free movement of goods and services between the Member Sfafes must be eliminated.as

Grounded in science: The justification requirements are to be grounded in science, not in speculation or in hope contrary to experience:

26. Measures taken by a Contracting Party must be based on scientific evidence; they must be proportionate, non' discriminatory, transparent, and consistent with similar /neasures alreadY taken. .-.

29. The national authority must address fhe issue of the protection of health and life of humans- A purely hypothetical or academic consideration will not suffice' "'

32. Such restrictive measures must be non-discriminatory and objective, and must be applied within the framework of a policy based gp the best available scientific knowledge at any given time.""

80. Burden of proof: The burden of proof lies with the State, including the burden to establish that the benefits of the measure cannot be met with less restrictive a7 afternatives .ln Ladbrokes, the EFTA Court held:

ggTl aa See for instance Joined Cases C-34/95, C-35/95 and C-36/95 De Agostinitl ECR l-3843, at paragraph 47 (emphasis added). o5 Case E-4104, Pedicel, at paragraph 53 See also Opinion of Advocate General Poiares Maduro in Case C- 434t04 Cimina! proceedings agiinst Jan-Erik Anders Ahokainen and Mati Leppik, [2006] ECR l'9171' at paragraph ('tite e*c"pt:6nslo the fundamentat principle of the free movement of goods must be construed 'sficiy. 21 The Member State concemed must demonstrate that the measure at issue is appropriate to the aim pursied and that it does not go beyond what is necessary to achieve that aim; a6 Case E-3/00 EFTA Surveitlance Authority v Norway. ot Case E-3/06 Ladbrokes.In its Guide to the application of Treaty provisions governing the free movement of justified goods, the Commission states that to lift the burd'en of proof, 'a mere statement that the measure is on to

EEAContractingPartiesarefreefoseftheobjectivesof' th;;p;ii;ioi{amingand'whereappropriate'todefinein so u g H ow ev e r' th e a etait th e' I ev e t- of p rote ctio n ht' rritictive measures they impose must-satisfy the and taid down in ine case law of both the CourT "o'iAition,tnebourt of Justice of the European Communities aliiianer.the ECJ") as regards their proportiona.lity Gaming Machines' at pZrag-rap-h.29;.and the iudgment $ee and c- oitn" EcJ in Joined cases c-338/04, C-359/04 not yet sa-OtOi ptacanica, iudgment of 6 March 2007' respect' the repofted, at paragrapis a7 and 48)' In that niiaii'of prooii"'on the Sfate responsible for the restriction (see Gamting Machines, at paragraph 31)'48 (waterfatls), the court addressed public 81. ln EFTA Surveillance Authorityv Norway undertakingstoproducehydropower'Notwithstandingtheimportant held that the state had to environmental considerations at stake, the court question would serve the state's demonstrate not only that the measure in be achieved as effectively by environmental aims, but that those aims could not less restrictive measures:

Furthermore,inorderfortheexerciseofownershiprights of attaining a nv iinti" to be a necessary means 6{itiiut" ",iiti"'piinti, irt"r"st obiective,-it is.not sufficient that tii" is an easier way of making the unaeiat

foremost among the [T]he heatth and tife of humans rank assefs or interests piot:.ected by Article 30 EC'sg

m,ndsortheabsenceofanaIysisofpossiblealtemativeswiltbedeemednotsatisfactory', at p. 30. (emphasis added)' at Case E-3/06 Ladbrokes,at paragraph 42' paragraph 88 (emPhasis added)' see also ae surveiltance Authorityv Norway (wgtgrtat]! at case E-2t06 EFTA paragraph 50 and Case E-3/05 EFTA Surveittance Authority N";;;i'G;^aiini wtu'niiLs)';t Case E-1106 paragraph 6t'. As ihe EFTA Court may recall' Authoity v Norway (Finmark" aitowancesl,lt EFTA Surveiltance oiproof to the private party'.cf' the ruling of case taw purport" in some instances ;;i;n th"'6'rdln Norwegian the rulins of the osio citv Court in case No' 0e- the Norwesian supremJd;;i";;;;Ri:t-d;;. rtie;il 0501 76TV1-OTIR/06. at paragraph 27. 5o case c-143/06 Ludwigs-Apotheke l2}o7lEcR l-9623, 27

83. The importance of that objective, however, does not relieve the State of the burden to show that the ban actually serves that aim, and that the benefits of the measure cannot be met as effectively through less restrictive measures.

84. By contrast, 'denormalization' of lawful tobacco use as a policy - independent of the public health goal - is not a legitimate justification under Article 13 for restricting the free movement of lawful goods. Such an objective is neither mentioned in the Article itself nor finds any support in European law. lf a measure restricting inter-EEA trade does nof reduce tobacco consumption and thereby promote public health, then an EEA State cannot restrain inter-EEA trade and eliminate lawful brand competition based on a desire to vilify the product' lf (as the experience of other jurisdictions shows), the ban does not achieve its stated public health objective of reducing tobacco consumption, then the State cannot justify its action by claiming the State does not like tobacco and it wants others not to like it as well. lf the measure does not reduce consumption, the State's orofessed desire to achieve 'denormalization' is legally irrelevant.

c. Criteria for Proportionality Assessment

85. Next, the EFTA Court should provide guidance for the national court as to what is the proper standard of explanation and evidence required from the State.

86. In Bressol the Court of Justice held that the State had to show by specific evidence that the circumstances addressed by the measure actually created a risk to public health, and that the proposed measure actually reduced that risk' The State claimed it sought to address a particular circumstance creating a risk to public health. The Court explained:

That being the case, it is for the competent national authorities to show that such risks actually exist (see, by analogy, Apothekerkammer des Saarlandes and Others, paragraph 39). According to settled case-law, it is for those authorities, where they adopt a measure derogating from a principle enshrined by European Union Law, to show in each individual case that that measure is appropriate for securing the attainment of the obiective relied upon and does not go beyond what is necessary to attain it" The reasons invoked by a Member Sfafe by way of iustification must thus be accompanied by an analysis of the appropriateness and proportionality of the measure adopted by that State and by specific evidence substantiating its arguments (see, to that effect, Case C- z6

45' and 8/02 Leichtle [2004] ECR t-2641, paragraph Comm,ission v nusiria, paragraph 63)'" of tobacco products is 87. Here, of course, the Plaintiff agrees that consu mption Display of tobacco products is detrimental to health. But that is not in question. consumption' Thus' at not a risk to public health unless it increases tobacco whether a ban on the mere issue here are two much narrower questions: first, reduce tobacco consumption? display of tobacco products at the point of sale will had an actual effect in And, second, whether, even if the proposed restriction be met by alternative means reducing tobacco consumption, can such effects less restrictive of trade?

(a) Criteria for SuitabilitY fact that, as a matter of logic' the 88. FirSt the referring court must consider the disp|aybanappearsunsuitableforreducingtobaccoconsumption.

swedish rule barring residents 89. In Rosengren,u, the court of Justice confronted a frompurchasinga|coho|abroadandbringingithometoSweden.Swedish instead, to order it through residents who wanted imported a|coho| were required, that the rule amounted to the Swedish retail monopoly. The Court of Justice held restriction and such a a measure with equivalent effect to a quantitative restriction was not justified'

more inconvenient' 90. The swedish authorities argued that, by making importation The court found this the restriction would help to reduce alcohol consumption' to purchase alcohol argument insufficient, noting that residents who wanted consumption due to the ban would surely find a way to do so; any decrease in wasmarginatandinsufficienttojustifytherestrictionontrade:

consumers use the 34. ttlt is nof disputed that, when servites of Sysiembolaget to have alcoholic beverages imported,fhoseconcemedareconfrontedwithavarietyof inconvenienceswithwhichtheywoutdnotbefacedwere they to import the beverages themselves' "'

3Apri|2010,notyetreporteda1paragraph71(emphasisadded).Seea|so Directiie) ECR l-4323, at paragraph 51 case c-319/06 commissioi vluxe,mnorrg tpoitiJ'wo-rkeis Izboal which may be invoked by a Member State in order (emphasis added): 'tt nai n ne remember6d tnai tne reasons proviae must be accompanied by appropriate justify derogation piriipte of freediiio i"ruiggs to a rii-ti" the restrictive measure adopted by or by an analysis of the expedi"r"; ;;;;;,"portionality.of evidence to be-sibstantiated (see' to that effect' Case that State, and precise'ividence enabting it" iigi;;iiti paragraph 36, and the case-law cited).' c-254/05 commission rE"tgii, t2oo7l ecn razag, 52 Case C-17oto4 Rosengren [2007] ECR l-4071' 45. However, it must be noted that, although the prohibition on private individuals directly importing alcoholic beverages reduces the sources available to the consumer and may contribute, to a certain extent, because of the difficulty of supply, to prevention of the harmful effects of those beverages, the fact none the less remains that, pursuant to Chapter 5, Paragraph 5, of the alkohollagen, the consumer may stillask Sysfem bolaget to supply him with those goods. ...

47. In the light of the alleged obiective, that is to say, timiting generatty the consumption of alcohol in the interest of protecting the heatth and life of humans, that prohibition, because of the rather marginal nature of its effects in that regard, must be considered unsuitable for achievement of that obiective.s3

o.,l Under the Noruvegian law, tobacco products must be blocked from view at the point of sale; but their availability in shuttered cabinets can still be noted by placards saying 'Tobacco'; here, aS in Rosengre n,'Customers may sft// ask'for tobacco products and they will be sold those products on request. The additional inconvenience of doing so cannot be expected to have more than 'rather marginal' effect on consumption.sa The only impact will be on free movement and competition - on the ability of new brands to enter and compete for market share in a declining market.

92. Thus, as positive effects of a display ban cannot be assumed, this Court should make clear that the State must present specific evidence showing that the mere. display of tobacco products at the point of sale actually creates health risks - r.e., the visibility of tobacco packages actually rncreases consumption of tobacco products - and that the elimination of visible display of the packs will result in a reduction in that risk, i.e., will result in a decrease in consumption of tobacco products. s3 /d. lemphasis added). 5a ln addition to the ruling in Rosengren, see also Gase E-9/00 EFTA Surveillance Authoity v Norway (Alcopops). In that case Nonruay argued that restrictions on alcopops were justified because otherwise total alcohol consumption would inciease, as consumption of alcopops would come on top of existing consumption of the competing product, beer. The Court accepted that there could be a possibility that alcohol consumption would increase;-siitt the Court did not find the restrictions justifiedl, see paragraphs 56 and 57 (emphasis added); 'Excessiye alcohol consumption causes heatth problems, as well as considerable social problems, and there is a Iink between availability an'd the harmfut effects caused by the consumption of alcohol. However, the Court finds that the defendant has not been able to show that the abave-mentioned conditions for justification [suitability and necessity] under Afticte 13 EEA have been fulfilled. [...] The Court has not, in that regard, been convinced by the argument of the defendant that the consumption of alcopops or other pre-packaged alcoholic beverages containing /ess fhat 4.75% alcohol, is merely additional to the consumption of beer. As sef out above in paragraphs 37 et seq., these products conslitute, at least partially and potentially, alternative choices for certain groups of consumers.' 30

the nature of 93' A|though the Court is not called to assess evidence, understanding guidance here required the available evidence is important to understanding the briefly below (i) that for the referring court. With this in mind, the Plaintiff will show (ii) that abundant the evidence relied upon by the State is facially insufficient; have had no impact empirical evidence shows that display bans, where enacted, ontobaccoconsumption;and(iii)thatabanentai|sconsequencescontrarytothe Plaintiff submits that goal of reducing tobacco consumption, such as illicit trade. unambiguously to the already existing evidence makes clear the need to convey the the referring court, and by implication the Norwegian authorities, proportionalityrequirementsthatfo||owfromEuropeanlaw.

(b) lnsufficiency of evidence adduced by the Sfate

94.The.evidence,adducedbytheStatedoesnotmeetthisrequirement.ln2003' the state notified after it had already decided to implement a total display ban, theEFTASurveillanceAuthorityoftheproposedbanandbelated|yaskedthe on the sIRUS institute - an agency within the realm of the Ministry, dependant for any support for such Ministry for its funding - to quickly canvass the literature providing little support for a measure.ss On short notice, SIRUS delivered a report disPlaY bans.

on the effects of a 9s. The Ministry conceded that there was 'limited documentation bans has been noted visual disptay ban.'56 The lack of evidence supporting such claim that viewing in other jurisdictions. Health Canada conceded that the people to smoke 'remains very tobacco packs on display at retail stores causes 57 bans reduce specutative at this time.' Finding the evidence that display high, other consumption inadequate and the risk of increasing illicit trade and governments such as Denmark and sweden have recently considered rejected point of sale display bans for tobacco products.ss

96'Findingvirtua||ynoactualsupportforbanningdisplayatretai|,theS|RUSauthors into a question devoted most of their report to a lengthy discussion of research

on a mandate formulated in the yearly u, authored by Karl Erik Lund and Jostein Rise, was based The report, stated that the Ministry ,allocation 2008 irom the Ministry, ."" if't" pi"tu.. oflhe report' The mandate letter'for such a ban to existed on tn" ere"ts of a visual diplay ban, 'but we.consider was aware that limited documentation at section 1 of the report' The report is available be a prolongation of the b", ;A;;tt iee '2 "dviertisingi, www.sirus.no. 56 Section 1.2 of the rePort. 57 Health canada, available at http://www.hc-sc.gc.calindex-eng.php. tu See note 10 above' JI

not at issue: whether mass media tobacco advertising has any impact on smoking prevalence. The authors claim that 'exposure to tobacco advertising rncreases the probability of young persons starting to smoke. Tobacco advertising also increases aggregate tobacco consumption, but to a modest degree.'5e

97. Even if one accepted the SIRUS claim that tobacco advertising has some effect on consumption, the authors of the SIRUS report characterize that effect as 'modest'and concede it is questionable whether the advertising studies have any relevance to retail displays:

[i]t may be discussed whether the results from this research [into tobacco advertising] have any place in the knowledge basis for the proposal of a ban on visible displays of tobacco products. Displays of tobacco products can be regarded as a less intrusive sales influence than ordinary adveftising, which directly tries to convince users to buy, for instance with s/ogans. lt can therefore be countered that the exercrses in Chapters 2 and 3 [i.e., the discussion of research into tobacco advertisingl have Iimited relevance as the transfer value [to displays] is Iow.60

98. Thus, even applying its own logic - by which research into advertising 'may' be 'assumed' to extend to tobacco display - the SIRUS report fails to meet the State's burden to show that the proposed measure would have a material impact on public health. Even according to the SIRUS report, the impact of tobacco advertising itself is said to be 'modesf,' and display at the point of sale is said to be even less effective as a 'sa/es influence'than ordinary advertising. ln other words, accepting the SIRUS report on its own terms, the report shows only that ff display bans have any impact on smoking - a supposition the authors could not verify - that impact would be /ess than 'modesf.' u' The authors ignore a growing view in the academic research literature that decades of studies demonstrate that tobacco advertising drives brand selection, but has no impact on tobacco consumption in general or among youth in particular. Nelson, J.P.,'What is Leamed from Longitudinal Sfudr'es of Adveftising and Youth Dinking and Smoking? A Critical Assessmenf', in International Journal of Environmental Research and Public Health, Vol. 7 , p. 873-74 (Mar. 2010) (noting that review of 18 studies shows that 'both partial and complete bans of advertising are ineffective in reducing alcohol or tobacco use for adult and youth populations'). Earlier studies calling out the lack of scientific support for a link between advertising and tobacco consumption include: Geweke, J., and D.L. Martin, 'Pitfalls in Drawing Policy Conclusions From Retrospective Suruey Data: the Case of Adverlising and Smoking', Journal of Risk and Uncertainty, Vol. 25, pp. 111-131 (2002); Heckman, J.J., Flyer, F., and Loughlin , C.,'An Assessrnenf of Causal lnference in Smoking lnitiation Research and a Framework for Future Research', Econ. Inq. Vol. 46, pp. 37-44 (2008); Hublet, A., et al., 'Association Between Tobacco Control Policies and Smoking BehaviorAmong Adolescents in 29 European Counties', Addiction, Vol. 104, pp. 1918-1926 (2009) (reporting that advertising bans in 29 developed countries do not have a significant effect on smoking behaviour of youth). uo SIRUS report on p. 58 under heading 7 'Conclusions' second paragraph. 3Z

even this '/ess fhan modest' 99. The SIRUS report cites no evidence supporting advertising serves the same purposes effect. There is no evidence that tobacco products on shelves at the point of sale' or or has the same effect as display of thatbanningsuchdisp|aywi|lhavethesameimpactasbanningadvertising. supposition that a display ban will Even with the SIRUS report in hand, Norway's reduce tobacco consumption is without foundation'

that the industry spends money on brand 100. The stRUS authors point to the fact money opposing display bans - and package development, and indeed spends aspolemicalsupportthatdisplayingpacksatretailmustincreasesmoking ln fact' for decades the prevalence. This is not science or empirical evidence' market share in a declining market' industry has been competing vigorously for Theseexpendituresarenotaimedat,anddonotachieve,anincreasein for market share seriously' and it consumption. The Plaintiff does take competing hasfi|edtheseobservationsinsupportofthatvitalinterest.

l0l.lntheend,theslRUSauthorsareforcedtoconcedethattheysimply'assurne' thatthee|iminationofdisp|ayatthepointofsa|ewi||reducetobacco for that assumption; the experience of consumption. There is no evidentiary basis Restrictions on trade cannot be other jurisdictions contradicts the assumption' justified on the basis of so little'

a Nobe| Prize winning economist, 102. The attached report of Dr. Heckman, underscoresthefai|ureofNonruaytojustifyitsban.

Dispray Ban, dated 17 Annex 2: Report of James J. Heckman -- Noruvay JanuarY 2011.

study of individual decision making' 103. Dr. Heckman's specialty includes the includingriskyyouthdecisionssuchassmoking;hisworkinthisfie|dwas in 2000 awarded him the Nobel Prize recognized by the Nobel committee which area, Dr. Heckman has reviewed in Economics. ln addition to his own work in the on the causes of youth smoking and the extensive economic and health literature the STRUS rePort' of research in his own field on the causes 104. Dr. Heckman reports that the extensive price, access' parental influence' youth smoking has identified the causal role of concludes that,[a] peer pressure, individual persona|ity, and others. Heckman detaitedexaminationoftheliteratureshowsthatpoint-of-saledisplayshavenot beenidentifiedascausalfactorsinyouthsmokinginitiationorsmoking 33

prevalence.'ut By contrast, Dr. Heckman confirms, as SIRUS concedes, that 'restrictions on youth access to tobacco, when rigorously enforced, have been found to reduce youth smoking.'62

105. Dr. Heckman has reviewed the extensive economics and public health literature concerning the causes of smoking in general and youth smoking in particular. He reports that this literature provides no support for the idea that retail sales displays are a causal factor in youth smoking. Youth smoking behavior has been 'extensively investigated'and the literature has 'identified several significant causal factors for youth smoking initiation,'but it 'has not established point-ofsale disptays as a causalfactor.'63 Dr. Heckman notes that, while restrictions on display have been recommended, these recommendations appear to reflect public attitudes about smoking; the recommendations are not based on science, and the studies failto provide any evidence linking displays to actual smoking behavior. There is, in his words, no'evidence establishing a causal link between point-of-sale disptay of tobacco products and smoking initiation or prevalence.'64

106. Similarly, based on his review of the SIRUS report, Dr. Heckman concludes that the report 'does not provide evidence that is a reliable basis from which to infer the existence of a causal tink between point-of-sale display and smoking initiation or prevalence'Dr. Heckman notes that the authors 'argue that the findings of a broad literature on advertising and smoking should be applied to the 'knowledge base for the proposal of a ban on visual display of tobacco products,' despite their own stated doubts about the relevance of the cited literature to the effect of point-of-sale tobacco displays.' Dr. Heckman also notes that the authors themselves state that '[d]isplays of tobacco products can be regarded as a /ess intrusive sa/es influence than ordinary adveftising ... lt can therefore be countered that the exercises in Chapters 2 and 3 [of the S/RUS repoft] have uu timited relevance as the transfer value is low.' But 'the findings of a literature evaluating the effects of various types of advertising cannot be applied to point- of-sale disptays unless there is a sound empiricalortheoretical basisfor betieving that the effects on smoking of point-of-sale displays are the same as the effects on smoking of the various other forms of advertising studied. ln the

61 Heckman Report at paragraph 8 (a). 62 Id.paragraph2l. 63 /d. paragraph 20. uo ld. paragraph 8 (b). 65 /d. paragraph 41 . 34

must be separately absence of such bases the effect of point-of-sale displays 66 displays 'does not evaluated.' The sole report cited by SIRUS relating to of point-of-sale provide such abasis'and 'does not address or esfab/ish an effect 67 of smoking'' Dr' Heckman disptay on either the tong run prevalence or intensity between point-of-sale concf udes that there is ho evidence of a casual connection 68 disptay and initiation or consumption of cigarettes''

in lceland, canada' 107. Different variants of display bans have been introduced on smoking Australia, lreland and Thailand.oe The impact of these bans studies by prevalence has been specifica||y studied. Those studies, including support for proponents of such bans, consistently show that there is 'no empirical in smoking the proposition that a disptay ban is likely to cause a reduction prevalence.'70

effect (i) '[T]he lcelandic disptay ban had no statisticalty significant groups foy which on smoking prrrh"nce. Ihis is true for both age datawasavailable:(1)individuatsagedlStoTgyearsand(2) individuats aged 15 to 24 Years'"' (ii)'fl]tisverydifficutttoconcludethatthedisptaybanhasreduced adolescentpreva|enceinlcelandwhen,fiveyearsafterthe the year introduction of the ban, prevalence is higher than preceding its start.'72

(iii)'TheanalysisoftheproportionofyoungsmokersinCanadashows in the proportion- of that the ban has not led to any reduition . youngsmokersoverandabovewhatistobeexpectedrelativeto in general.'73 the trend in the individuat province and in canada ,[tn effect (iv) Canada,] disp|ay bans had no statisticalty significant

66 Id. paragraph 42- 67 ld. paragraph 44- 68 /d. paragraph 45. 6e into force' Display bans in Finland and the UK have not yet come LECG' p' 5 (March 2010) (commissioned ,o padilla, J.,,The Effectiveness of Display Bans:the Case of lceland', by PMI). 71 Id. and Pubtic Health Lessons" IEA Discussion 72 Basham, p.,,canada's Ruinous Tobacco Display Ban: Economic Paper No.29, pp. 13-14 (July 2010) (emphasis added)' ,Trends uence of a Ban on Visible Display of Tobacco ,. Gorm Gronnevet, in Smoking Habits as a Conseq Products, Section 2, p' 12 (16 April 2007) (emphasis added)' J3

on smoking Prevalence.'7a

(v) '[D]isptay bans have not resulted in a change in prevalence or cinsumption in young people or adults in Canada to the end of 2008."',

(vi) '[T]here is no evidence that the Thai display ban has reduced sioking, and the Thai government has recently acknowledged that smoking preualence is increasing among both women and adolescents."" (vii)' ' 'Using a variety of measures, it appears that the lrish display ban yeffeciive as of 1 Juty 2OO9l has had either no impact on smoking prevalence and consumptjgn in tretand or rs associated with a small increase in Prevalence."'

seeking to 108. lretand: Recent publications, authored by proponents of the lrish ban assess its effectiveness, reported that banning displays had not reduced smoking in lreland. ln'Evaluation of the removal of point-of-sale tobacco displays in lreland,' the authors reported that they found no changes in overall smoking prevalence, and found instead a small increase in underage smoking: '[i]n all, 10% of teenagers reported being current regular smokers pre-legislation ' .. by post-tegistation, 10.5%o of teenagers were reporting being current regular smokers...'tu Similarly, for adults 'the implementation of the legislation caused no immediate significant change in smoking prevalence.'7e ln a paper published at the same time, 'Econ omic evaluation of the removal of tobacco promotional disptays in lreland,'the authors reported the same conclusion based on cigarette sales data: '[n]o statisticatty significant change in cigarette pack sales was observed fottowing the implementation of the legislation.'8o

at 109. Canada. A very recent study by LECG commissioned by PMI looked in depth the Canadian experience with displays bans, examining data year by year and province by province. LECG was formed by University academics over 20 years ago; it now has 700 employees in 11 countries, providing independent economic studies for government agencies and corporations around the world'

(commissioned 7a padilla, J.,,The Effectiveness of Disptay Bans: the Case of Canada', LECG (December 2010) by PMI). (Emphasis added.) 75 Basham, p.,'Canada's Ruinous Tobacco Display Ban', p.8 (2010) (emphasis added). 'u td.pp.15-16 (emPhasis added)' " td. p.'18 (emphasis added). tu lreland, in Tobacco Control, McNeif l, A., et at., Evaluation of the removal of point-of-sale tobacco displays in published online 18 November 2010. 7e !d. at 4. uo /d. at p. 3. Annex 3: Report of Jose Padilla, LECG: the Effectiveness of Display Bans: the Case of Canada.

display bans have 110. The Canadian experience is particularly illuminating, because experts to been introduced at separate times in separate provinces, allowing points in time and measure the impact of implementing display at several distinct location.

a reduction in smoking 111.lt display bans had their desired effect, there should be prevalence after the implementation of the display ban in each canadian of province. No such effect can be seen in any province. The provinces bans; both did so Saskatchewan and Manitoba were the first to introduce display bans in 2008' in 2005; euebec, Ontario and British Columbia introduced display during Two provinces, New Brunswick and Neffoundland, had no display ban for each the period of analysis. The report compared the decline in smoking province from 2005 to 2010:

Thiscomparisondoesnotrevealanyrelationbetween disptay b'ans and smoking prevalence,'.The smoking prevaiencr rn saskafc hewan, one of the first provinces to introduce a display ban, is as high as the smoking prevalence in New Brunswick and Newfoundland' provinces without a disptay ban duing the period of analysis.onthecontrary,theprovinceswiththelowest u,,,,ug"smokingrateintroducedadisplaybanin200S,the last Year of the samPle Period' lnaddition,ifdisplaybanshadaneffectonsmoking prevalence I would expect the rate of decline to be greater in provinces with a disptay ban relative to provinces without adisptaybanortothosethatintroducedadisplaybanat theend-ofthesampleperiod.However,thegraphshows T:i#if*l#:#{#:#l;:f ilr:l:x,Yf#i"\f,'!!" 2.7%o respectively, white the average rate of decline is 3.5%. tn'compaiison, the rate of dectine in provinces that introduced a disptay ban in 2a08 or later is above average (3.9%).81

after the introduction of 112. similarly, an analysis of smoking prevalence before and consumption: each ban showed no relationship between the bans and smoking

The introduction of display hans does not appear to have accelerated the decline of smoking rates. Had the

81 /d. on p. 12last paragraph (emphasis added)' 1-7

ban been effective, I would expect fo see a permanent fall in smoking prevalence rates and/or the rate of decline of the smoking prevalence to speed up after the ban. However, as shown in Figure 2, with the exception of Manitoba, there is no clear break in the declining trend in the provinces after display bans were introduced. ln Manitoba, the obserued decline in 2006 occurred after the ban on smoking in public areas and workplaces (at the end ot 2004) and the ban on point of sale displays (at the beginning of 2005).82

113. The smoking prevalence decline in the first provinces to introduce the ban, in 2005, was lower than the decline in provinces that did not introduce a ban until 2008 -- exactly the opposite of what would be expected if the bans were effective in reducing consumption.s3

114. The LECG Canadian study also reviewed the data for smoking prevalence among adolescents. The display bans had no perceivable impact on adolescent smoking: The authors reported reaching 'very similar results'when using 'fhe same econometric models to estimate the impact of display bans on the smoking prevalence of 15 to 17 year o/ds.' There was no statistically significant reduction in underage smoking, meaning that 'ft is nof possib/e fo assed that the impact is different from zero.'94

115. The LECG study concluded that 'display hans had no statistically significant effect on smoking prevalence.'85 Smoking did decline noticeably on other occasions, but for unrelated reasons: The LECG study confirmed what numerous earlier studies had shown .Ihat'tobacco prices had a negative and statistically significant relationship with smoking prevalence,' i.e., when tobacco prices rise, tobacco consumption falls.

Ihese resulfs are reliable and robust. They are reliable because the estimated impact rs based on the comparison of smoking prevalence rates before and after the bans were implemented and across provinces. The results are robust because they do not change when additional control variables are added to the regression model and when different methods are used to estimate the regression model. The results also remain unchanged when the regression model is estimated using individual level data taking into account individual characteristics that may

/d. on p. 13 (emphasis added).

83 td. s4 ld. on p.23. 85 /d. on p. 7 last paragraph (emphasis added). i nfl ue n ce sm oki n g decisions'

ln summary, my analysis does not support the claim that a display nan'is iit to lead to a reduction of smoking rafes. Th'e data show ffiat"ty [increases m/ the real price of cigarettes reduces smoking prevalence'"-

conclusions'87 116. lceland: An earlier study of lceland reached the same -Ihe of Display Annex 4: Report of Jose Padilla, LECG: Effectiveness Bans: the Case of lceland. before and after the ban' 117. This report compared smoking consumption in lceland, of which had with smoking consumption data for Norway and sweden, neither showed that implemented a ban in the period under study. This study again degrees, in all increasing pricesresulted in deceased consumption, in varying bans had no three countries. The study also showed, once again, that display apparentimpactonconsumptioningenera|oramongyouthinparticular:

I found very similar resu/fs when I used the same econometiic models [as for the poputation in general] t.o estimatetheimpactofdisplaybansonsmokingprevalence of 15 to 24 Year olds.

t'againfoundthatdisptaybanswerenotaneffective biacco control measure in lceland. The estimated impact isnegativebutverysmall(essthanh'alf.apercentage'.' pointi and not statisticatty significant ( ).. means that it is noitpossib/e fo assed that the impact is 'hisdifferent from zero.tt.

studied the lcelandic and 118. A NOnruegian researcher, Gorm Gronnevet, also Canadian experience with display bans'

oispIayBans;theCaseofCanada,,LECG(December2010),p. 7-8. 2010)' u7 padilla, J.,,The Effectiveness of Display Bans: the Case of lceland,'LECG(March uu /d. on page 26 under heading B. 39

Annex 5: Report of Gorm Gronnevet. Trends in Smoking Habits as a conseouence of a Ban on Visible Display of Tobacco Products

119. His 2007 report summarizes the prior studies on display bans and the results of his own more recent studies. The report concludes that there are no proven effects of disPlaY bans:

The analysis of the data for canada and lceland does not support ihe idea that the bans have led to a reduction in the proportion of young smokers. Data from Australia does not appear to be available, and therefore no empirical analysis of this has been carried out. Two surveys involving schoolchildren in Australia show, however, that the proportion of young smokers is very similarto that in Canada and that the reduction in the proportion of young smokersbeganthreeyearsbeforethebanondisplaysof tobacco products was introduced in victoria. Therefore, these reports do not support the idea that a ban on displays of tobacco products produces a reduction in the proportion of Young smokers either.se proven 120. All these studies (and numerous others) confirm that there are in fact methods for reducing tobacco consumption. Both the Canadian and lcelandic studies show, for example, that tobacco prices are the most effective means of curbing smoking with 'very strong'effects that are 'very robust' and'very consistent.' eo These results are consistent with those reported by SIRUS.

121. Display bans, however, have not been shown to reduce tobacco consumption; indeed, the experience of jurisdictions that have imposed such bans in spite of the absence of supporting evidence shows that display bans have no apparent impact on tobacco consumption. Consideration of the actual effect of display bans is critical to the suitability analysis.

122. The Nonrvegian authorities have not found or submitted objective, science-based analysis, supported by detailed figures, demonstrating with solid and consistent data that display of tobacco products itself creates a genuine risk to public health and that banning such displays is a suitable measure for reducing such risks. The

se Tobacco Gorm Grsnnevet, 'Trends in Smoking Habits as a Conseguence of a Ban on Visible Display of products,,16 April 2007, Norwegian School of Economics and Business Administration, p. 3' to LEGC Canadian report on Page 10. 40

EFTA Court should make clear this legislative requirement in its reply to the referring court.

(d) Co n si de rati o n of c o u nte rvai I i n g fa ctors

123. The Norwegian authorities have also failed thus far to consider the known unintended consequences of display bans and other restrictions on the trade in legitimate branded tobacco products.

124. lllicit trade considerations: Nonruay has failed to demonstrate that the supposed benefits of a display ban are not offset by the growth in illicit trade. Experience in other jurisdictions has been that display bans increase the cost and difficulty of tobacco sales at retail outlets and result in an increase in illicit trade. A recent report by the Ontario Tobacco Research Unit found that:

Tobacco contro! measures such as adveftising bans, public awareness campaigns, and point-of-sale display bans have had the cumulative effects of denormalizing traditional cigarette brands, stripping them of the social significance they once had. As big tobacco company brands have..been deiormatized, there has been growth in demand for "no- name" cigarettes and discount brands. This bourgeoping demand has been fitted by the contraband market "'"'

125. Similarly, a study by PricewaterhouseCoopers directly linked 'retail display bans and increased usage of iltegal tobacco, particularly contraband products. rates ... [lln Saskatchewan, since the introduction of retail display bans, smoking have increased to 25 per cent, with some areas of the province experiencing e2 smoking rates of over 357o, the highest smoking rate in Canada.'

126. In lreland, within a month of introducing the ban, contraband product was found to in traditional retail tobacco outlets, prompting the lrish Consumer Association express concern that 'bogus cigarettes have now penetrated the retail sector, when it was always a predominantty btack marketissue.'e3

nft,,Anti-ContrabandPolicyMeasures:EvidenceforBetterPractice''p.41 and Mitigating Risk (June 2009) (emphasis aooloj. se" also ASH New Zealand ,'itticit Tooacco Trade: Monitoring that laws are unreasonable, contibute in New Zealand', p. 1i tJrn" dOf Ol Excessiye regulation, or perceptions to cultura! tolerance of and increases in black market activity'' p' e2 pricewaterhousecoope rs,'Australia's lllegal Tobacco Market: counting the cost of Australia's Black Market', bans', available at 1 0 (February 2010) 'asses sing Australia's expeience with display www.proOuitdisplayban.com/Pages/ReportsandStudies.aspx (emphasis added)' e3 'Eight retailers probed for Dermott Jewel, president of the Consumer Association of lreland, quoted in J. Bray, selling bogus cigareffes', Sunday Tribune 2 August 2009' 41

127. Lackof visibility facilitates the infiltration of contraband/counterfeit brands. lt also increases the migration of customers from small outlets towards illicit markets in what a retail association has called a'contraband epidemic.'e4 That epidemic is already of vast proportions throughout Europe.

trade 128. public health officials have repeatedly acknowledged that the illicit tobacco

lncreases tobacco consum Ption :

As wel/ as causing huge financial /osses, the illegaltrade in tobacco undermiies pubtic health initiatives to curb tobacco consurnptionbymakingcheapcigarettesavailableinan unregulated environment where they may be sold to vuln6rabte groups such as minors. ln addition the illegal trade in toiacco harms the interest of legitimafe busrnesses throughout the supply chain, tobacco e5^particularly m a n if a ct u re rs a n d refafiers. five 129. According to Canada's National Coalition Against Contraband Tobacco, years after putting its display ban in force:

[R]atesofteensmokinghavestoppeddecreasingandmay eien be on the rise. The 2010 Health canada report that measures teen smoking .-. shows that the rate of teen smoking...issfuckatl4%'Manyobseryersnotethisis becau{e of the widespread and easy youth access fo contraband tobacco which cosfs penn ies compared to legal tobacco. eo

130. Norway has failed even to consider these effects. Restraints on legitimate tobacco trade with no apparent health benefits should not be imposed without products consideration of the adverse consequences of illicit trade. lllicit tobacco to are untaxed and vastly cheaper and more readily affordable by and available youth. ,The price mechanism is generally accepted to be the most effective poputation-level poticy lever availabte to government to combat smoking are both responsive to [because] cigarette consumption and smoking cessafion changes in the price of tobacco products.'e7 Growth of illicit trade threatens to ea Article in lrish Times: 'Tobacco smuggling"'now epidemic"', see: http://www.irishtimes.com/newspaper/breaking/201010217lbreaking60'html Reference: et EU Commission, 'Confra band and Counterfeit Cigarettes: Frequently Asked Quesfions', Memo/10/334 (July 1S, iOiO), avaitable at http://ec.europa.eu/antifraud/budgeUcig-smug/2007-en'html' s6 ,Federal (May 26' 2010)' Canada, Govemment Report Card: Action on Contraband Cigareftes', p.21 (May 2O08). See also Lewit, E'' et ,t UK Consultation on the Future of Tobacco Control, at paragraph 2.27, Law and Economics, Vol' 24' pp' al.,-,The Effects of Aoviimiit Regulation on Teenage Smokln! Journal of ;The Smoking', Journal of Health 545-569 (19g1); Lewit and Coate, Potentialfor tising Exclse Taxes to Reduce Smoking in Young People', Tobacco Economics, Vol. 1, pp. 121-145 (1982); Lewit et al., PricJ, 'Public Policy, and Control, Vol. 6, SS 17-24 (1997). 42

keeping prices high' erode the best known method for reducing consumption: benefits of a display ban' if any' Norway has failed to offer any evidence that the of increases in illicit trade' are sufficient to offset the adverse consequences

evidence, the EFTA Court must 131. ln sum, without itself evaluating the detailed law requires it to demand from make clear to the referring court that European theStatec|earevidenceonthesepoints,inordertoestablishthatthemeasureat consumption' hand is suitable to meet its goal of reducing tobacco

D. Criteria for necessitY

(a)obligationtoexaminelessrestrictivemeasures referring court that the state's burden 132. The EFTA court must also indicate to the ofjustificationrequiresittodemonstratethatthebenefits(ifany)fromadisp|ay less restrictive of EEA trade' ban cannot be met through alternative measures acknowledged the existence of Given that Noruvegian officials have repeatedly methods not adopted by other proven methods of reducing consumption - Norway - that burden is particularly heavy here'

the court of Justice held: 133. ln commission v Austria (Brenner Motorway)

on the Without the need for the Court itsetf to give a ryli7 existence of alternative means, by rait or road' of regulation iransporting the goods covered by the contested to determine unaer ecoiomic;lly acceptabte conditions' or whether other meisures,' combined or not' could have o.f reducing bien adopted in order to attain the obiective emissionsofpoltutantsinthezoneconcerned,itsuffices a measure to say in thii respect that, before adopting so ridicat as a total traffic ban on a section of motorway constituting a vitat route of communication between-ceftain Member Sfafes, the Austrian the authorities were under a duty to examine carefully of using measures.less resfrfctive of iissibitity if their freedom of moveient, and discount them only was inadequacy, in relation to the obiective pursued' nu cl e arly esflbrished.

l34.Thesamereasoningappliesinthecontextoftobacco:writingoftheminimum retailpricecases,AdvocateGenera|Kokottexplainedthatsuchrestrictionswere

stria(BrennerMotorway)[2005]ECRl-9871atparagraph87(emphasis added). 43

disproportionate because the same benefits could be achieved through less restrictive measures.nn

61. The decisive question is whether the measures atissue are necess ary to achieve that aim or whether there are equally suitable, buf less restrictive, alternatives. ln this contextif is necess ary to bear in mind that, according to settled case-law of the coutt, when assessing compliance with the principle of proportionality in the field of public health, it must be recognised that the Member State can determine the level at which it would like to protect public health and how that tevel is to be achieved. ln that respect Member Sfafes enioy considerable discretion.

62. The Cour[ concluded in a iudgment concerning minimum prices for manufactured tobacco products that such prices were not necessary in order to protect public health. According to the Court, the obiective of protecting pubtic heatth may be adequately attained by increasing the taxation of manufactured tobacco products, which would safeguard the principle of free formation of prices. -..

64. fllncreases rn excrse duties are therefore a /ess intruiive measure than minimum prices, which are thus not necessary.

135. ln Commission v Greece, the Court of Justice in 2000 reached the same conclusion:

In its view fthe Greek government], the setting of a minimum price is necessary in order to discourage tobacco consumption and, if excise duty is increased, manufacturers and impofters may choose, by reducing their profit margin, not to pass fhe increase on to consumers'

It must be observed that Article 36 of the Treaty enables the Member Sfafes to apply national provisions that restrict intra-Community trade in order to protect the health and life of humans. However, rneasures based on Article 36 of the Treaty cannot he iustified unless they are necessary in order to attain the obiective pursued by that article and that ohiective is not capable of being attained by measures which are /ess restrictive of intra' CommunitY trade ...10o 136. The Court concluded that, because excise taxes were likely to be passed along to consumers, the supposed benefits of minimum prices could therefore be

tt opinion of Advocate General Kokott in Case C-198/08 European Commissionv Austia, ruling of 4 March 2010' not yet reported (emphasis added). ECR l-8921, at paragraph 30 (emphasis added).. 'oo Case C-2lr6€} Commission v Greece t20001 44

achieved by the less restrictive means of excise taxes; minimum price requirements were therefore unj ustified.101

size or 137. Here, Iess restrictive measures would include (i) regulations limiting the placement of retail displays 'appropriate for rational sa/es';102 (ii) effective enforcement of the existing age restrictions on tobacco sales (currently unenforced in Norway); and (iii) retail licensing like that adopted by numerous countries (repeatedly recommended to and rejected by Norway).

138. There is no evidence that Nonruegian authorities have carefully examined whether any benefits of a display ban can be achieved through such less restrictive alternatives; and whether they have considered it or not, they have failed to offer any evidence to sustain their burden on these points'

(b) Less resfrictive measures to reduce consumption of tobacco Products is to reduce 139. According to the Norwegian authorities, the main objective of the ban tobacco consumption among youth. ln the Hearing Memo issued by the Ministry of Health in connection with the changes to the Tobacco Act that led to the adoption of the ban, it is stated inter alia that:

The main obiective [of the proposal] is to reduce the number of smokers and snuff users amongst children and adolescentsinordertoprotectthemfromthesevere harmful effects that tobacco products cause. A reduction in thenumberofchildrenandadolescentswhosfadfouse tobacco products will, in the future, reduce the number of adulttobacco- and snuff users''"o

140. In the White Paper to the Tobacco Act, the authorities stated that:

TheMajorityhasnotedthattheintentionofthe[pointof sate diiptayl ban is to help protecting children and yourgri"rr'against the h'armfut effects of tobacco use.too to 141. Noruvegian health authorities have long recognized that effective measures reduce restrict the proportion of young smokers are the most important means to

tot /d at paragraphs 31-33. 102 Cf. the definition in the now repealed Tobacco Regulation" 103 Hearing Memo at point 2.1. 1oa proposition to the Odelsting (Parliament) No. 18 (2008-2009) at point 1'3. 45

questions are whether the tobacco use in the general population.l05 The relevant goal may be ban is an effective means to secure this goal and whether this achieved by alternative means less restrictive of EEA trade.

on personal importation 142.ln Rosengren, the Swedish authorities argued that a ban youth consumption of alcoholic beverages was justified because it would reduce ofalcohol.TheCourtrejectedthatargumentandheld:

However, since a ban such as that which arises from the nationaliegistation af issue in the main proceedings amounts t6 a derogation from the principle of the free ,movementofgoods,itisforthenationa|authoritiesfo demonstratelnat those rules are consistent with the principleofpropottionality,thatistosay'thattheyare ne)cessary in o'rder to ac-hieve the declared obiective, and thatthatobjectivecouldnotbeachievedbyless extensive prohibitions or restrictions' or by prohibitionsorrestrictionshavinglesseffectonintra. Communitytrade(see,tothateffect,CaseC-17/93Van derVetdt ieeq ECR l-3537, paragraph 15; Franz6n' paragrapit 75 and 76; and Ahokainen and Leppik' ParagraPh 31)''"" the burden on the State of 143. Given the breadth of the restriction, the court stressed demonstrating

order to achieve that obiective of 55. t...1 whether, in . prof"rtion of the heatth of young persons with at |east an 'ii,quiv:atent level of effectivbness, there are other methods /essrestrictiveoftheprincipteoffreemovement'ofgoods and capable of replacing the method at issue'

56. ln that regard, the Commission of the European communitieJsubmifs, without being contradicted on that point, that age check coutd be carried out by way of a 'declaration in which the purchaser of the imported goods iii"rug"" certifies, on a form accompanying t!19 . years when they are imported, that he is more than 20 of age.The.informalionbeforetheCourtdoesnot,onitsown, p"ermit the view to be taken that such a method, which 'attracts appropriate criminal penalties in the event of non- ioiiptiaice, would necessarily be /ess effective than that i m pl e me nted bY SYste mbol ag et'

Reporton|icensingschemefortobaccosa|es,atSection3,firstparagraph. ,ou paragraph 50 (emphasis added)' Case C-17O(O4 Rosengren t20071 ECR l-5909, at ST.Accordingtyithasnotbeenestab|ishedthatthebanat issuelnthemainproceedingsisproportionateforthe purposes of attaining the obiective of protecting young p"l"ont aOain2!the harmfut effects of alcohol consumPtion'''' and the state failed to 144. lnOther WOrdS, it was clear there were allernatives' demonstratethatthosea|ternativeswerenotatleastaseffectiveasthemeasure its burden to justify the in question. Accordingly, the state failed to carry restriction.

of proper enforcement of 145. The EFTA Court has also emphasized the importance preventing youth consumption age restrictions as a less restrictive alternative for of alcohol. The Court has held:

tn this context the Court nofes that the Norwegian Alcohol Actprevenfsfheservingofanyform'o,f'alcoholicbeverage ti under the agb of 18 in establishments with a ticense"inyo,r," fo serye alcoh6t. To the extent that the defendant's Co[|Caffisforanincreaseintheconsumptionofalcohol among people younger than 18' the adoption 9f measures to ensure the compliance with this requirement and the enforcement thereof' may constituteamoreappropriateandlessrestrictive measure.'ou of tobacco to adolescents' 146. whOleSale failure to enforce the ban on sales to anyone under the age of Although Nonruay purports to prohibit sales of tobacco of the worst track records in 18. when it cOmes to enforcemenf, Nonruay has one Europe.S|RUSrecent|ypub|ishedanarticleintheNorwegianMedica| adolescents'.10e Based Association,s Journal, entiiled 'Tobacco purchase among sIRUS concluded that for on an exhaustive survey of thousands of adolescents, their own tobacco the most part Norwegian adolescent smokers simply buy purchased for products in retail stores. according to slRus, adolescents and 70 % of the themselves about 60 % of all the cigarettes they consumed prohibiting such sales is neither snus. This report shows that the law in Norway countries, and could honored nor enforced. Norway is lax compared to other of enforcement' There is have addressed this problem through adequate means noevidencethatadisp|aybanwil|Solvethisproblem.

1o7 Id. (Alcopops), at paragraph 56, (emphasis added)' ,ou case E-g/00 EFTA surveiltance Authoity v commission 1os lssue No. 13 of 1 JulY 2010. 47

147. public health officials have repeatedly acknowledged that the best method for reducing underage smoking - far better than even the hoped for benefits of the retail display ban : is effective enforcement of the law against underage tobacco sales. yet Nonruay has failed to implement any effective method for enforcing the age restriction. Under existing law, retailers who violate the age restriction nevertheless cannot be barred from setling tobacco products. ln theory, fines may be assessed against the person in charge of the shop, but such sanctions are rarely invoked. There is no supervisory authority whose job it is to ensure retailers' compliance. Government officials instead wait for private individuals to report an offense; the matter is left for local police, who give such offenses low priority.

148. There are no reported cases where vendors have been fined for lack of compliance with age requirements. There is, also according to the Directorate of In Health,110 no examples of sanctions invoked for tobacco sales to adolescents. the Government's report on its National Strategy to curb tobacco use for the period 2006-2010, officials conclude that:

Enforcement of the age provision has not functioned in a sati sfactoritY m an ner.1t'

149. Failure to adopt retail licensing. ln a report from 2002, SIRUS strongly recommended that Nonruegian authorities adopt measures designed to secure compliance with the minimum legal age for tobacco purchase. Among such measures, SIRUS concedes, is an effective retait ticensing sysfem. Under such systems, in place in many countries around the world, all retailers selling tobacco products (often among the most profitable items for a small convenience store) must be licensed. Violations of the age-restriction laws result in revocation of that license and thus the elimination of the right to sell tobacco products'

150. SIRUS made the same recommendation in its 2008 study relating to the proposed display ban. As noted above, SIRUS found little evidence of the effectiveness of display bans. By contrast, SIRUS reported 'rob.tst'evidence that that age controls, effective sanctions for those controls, and a licensing system

in press 110 Telephone calls to case handlers, searches on website(s), case law checks in databases, searches databases etc. does not lead to findings of any examples of such cases. 'Nasjonal for det ,1, ,Hendhevingen av aldersgrensebestemmelsen har ikke fungert tilfredsstillende', see strategi tobakksforebyggende arbeidet 2006-2010' on p. 32. 48

'sfrong'effects in reducing enforcing compliance with age controls have underage smoking.1l2

l5l.The2002SlRUsreportalsoobservedthatresearchhadestablishedthatmass mediaanti-smokingcampaignsdirectedatado|escentshave,strongeffecfs,on with an effective licensing underage consumptio n, pafticularly when combined system to enforce age restrictions on tobacco sales'

,public of Tobacco Licensing r's Necessary 152. Heatth officials agree: 'Enforcement article by the center for Tobacco and works,-- this is the conclusion of a 2005 Lung Association of california Policy and organizing, a project of the American fundedbytheCaliforniaTobaccoContro|Program.Theartic|eentit|ed,Tobacco a study that Retail Licensing Reduces Tobacco sa/es to Minors'describes /aws, ,demonstrated that communities with comprehensive youth access prevalence' The seven inctuding a license, reduced their youth smoking access ordinances including a communities with comprehensive local youth comp|iance checks, had a ticensing program that included unannounced prevalence than the control statisticatty significant lower rate of youth smoking experience of one city' that had communitie.s."lt The article mentions the specific quarterly sfrngs 'carefully monitored its licensing ordinance, which includes '[m]erchanf's sa/es to minors "' decreased from fsurprise inspections]'and where abaselineofT0%beforetheadoptionoftheordinancetolessthanS%ointhe year and a hatf after enactment''114

l53.NoruvayhadcometotheSameconc|usionyearsear|ier.ln2003,theNonivegian a licensing system for Directorate for Health issued a report firmly recommending to the 2002 study by SIRUS tobacco retailers.l15 This report referred in particular thatreviewedtheliteraturecoveringl0measuresforreducingyouthsmoking' u measures concerned including licensing.ll Not one of the 10 recommended sa/e' Rather, the report concluded that disptay of tobacco products at the point of

avforskningsIitteraturenomtiItakforAredusereroykingbIantungdom,, on measures to reduce smoking among youth) ' published in August ZOdi. in r""i"vi of research literature six 'Tobacco Licensing Reduces Tobacco Sa/es fo Minors: 1,u The center for Tobacco Policy and organizing: Arguments for Enforcemenf', February 2005' 110 Id. Directorate for Health' 2003 115 ,Utredning om bevillingsordning for salg av tobakk'- Norwegian blant ungdom'' The report points 116 ,En forskningslitteraturen om tiltak for d redusere rayking gjennomgang av and very strong to and campaigns tfre mass media show robust out that in particular excise dutiei licencing !n severe dealt witn in tne report' but plain packaging - a more strong effects. Point of sales display bans-are not ..robust,' ..unclear,, ..Unsure,, is not and with and _ as having effects *iin ," basis that restriction is cited "mpirica| undocumented effects. Emphasis added' 49

'effective age control verification would be one of the most proven and effective

means'117 for reducing adolescent smoking.

154. Under the headin g 'A review of research literature on measures to reduce smoking among youth' the 2003 report explained:

fln2002]AftertheMinisterofHealthhadintroducedthe aimofreducingthetotalnumberofyoungsmokersbyS0 a %o, the Directorate for Heatth and Social Affairs presented study on available measures which could be used by potiticians in the spring of 2002. .. on this background, the Directorate for Heatth and social Affairs commissioned a knowledge report in this fietd which was sef to be prepared bytheresearchersKartErikLundandJosteinRisela/so theauthorsofthe200sstRusReporf/'lnthatReport, which was concluded prior to the summer of 2002, Jostein Rise and Karl Erik Lund recommend ten measures which would be effective in the work on reducing the youth smokers by 50 %- tn the Report, the authors write the following as regards the introduction of a licensing sysfem;

'The majority of research literature in this field shows that a ticensing sysfem where the dealers are deprived of their /icenseJ when setting tobacco to minors - is the only measure related to the campliance of the age limit which hasleadtoareductioninsetfsupplyamongchildrenand youngpeople'.Theyfurtherwritethat,theresearchshows that ot'her smoking preventive measures directed towards program:-. young peopte - such as educational .*o.11,1b" moreeffectiveiftheagelimitismademoreefficient.'."

packs (a 155. By contrast, SIRUS observed that eliminating brands on cigarette measure even more extreme than a display ban) had 'unclear'and'non-robust' effects on youth smoking prevalence. Point of sales display bans were not mentioned as effective measures in any of the reports prior to the SIRUS study commissioned by the government in connection with the adaptation of the ban in 2008.

156. similarly, in 2001 the National council on Tobacco and Health recommended sales that the Ministry of Health introduce a licensing system to reduce tobacco to adolescents. The Ministry rejected the recommendation, but noted that if

,ingforsaIgavtobakk,_NorwegianDirectorateforHea|th,2003,atpoint2.1. 11u rd. AA

compliance did not improve, it'might propose a licensing sysfem fortobacco sa/es af a later date.'11e

action to enforce the 157. Compliance has not improved, but the Ministry has taken no law against underage tobacco sales'

where licenses 158. The situation is very different for alcohol, with a licensing system may be revoked with immediate effect if sales to minors take place.120 by all Compliance with the age restriction on sale of alcohol is established visits on Nonruegian municipalities. The municipalities may conduct surprise prove are not licensed premises, where the inspectors will ask guests to that they length of the minors. Even non-recurring violations suffice for license revocation; e'g' revocation depends on the gravity of the infringement, taking into accounl, is the age of the underage person. Negligence or awareness of the infringement not required for revocation'

The licensing 159. License revocation has severe consequences fon most licensees. control system, therefore, gives licensees a strong incentive to establish internal routinestoavoidanyinfringementsoftheA|coho|Act'

licensing 160. There are no sound arguments to the effect that a corresponding than similar system with respect to tobacco products would be any less effective scheme for alcohol. To the contrary, SIRUS and others have repeatedly strong conceded that a licensing system would provide tobacco retailers would incentives to comply with the age restriction on tobacco sales and of encourage self controls by retail chains, since the sanction -- revocation license -- would be real and severe. SIRUS and others have repeatedly conceded that such enforcement would have a strong effect in reducing underage smoking Prevalence.

to institute a 161. The Ministry of Health has previously rejected the recommendation The tobacco retail licensing system because such a system was'bureaucratic'-121 effort of State,s view that reducing youth smoking is not worth the administrative the effectively enforcing the restriction on underage sales is inconsistent with

and Regulation on smoking in 1le Hearing Memo on changes to the Act on protection against harm of tobacco restaurantJ and other places serving food dated 9 August 2001' tto See the Norwegian Alcohol Act Section 1-8 cf' 1-5' www.dagsavisen'no' ,r, Articfe from Dagsavisen'Hayre stopper KrFs bevilling fortobakk', available at choice of instead implementing a measure that severely restraints free movement and has no documented effects on tobacco consumption'122

measure for 162.lnfact, Nonrvay has never identified display bans as an effective system reducing underage smoking. Nonivay has failed to implement a licensing ban that that is effective, and has suddenly chosen instead to adopt a display and experience shows does not work. Norway',s internal policies are inconsistent they are, in any event, an insufficient basis for restricting free movement'

scientific evidence 163. To justify the display ban, the state must prove through sound through that the health gains (if any) from the display ban cannot be achieved effective less restrictive measures, Such as retail licensing systems and enforcement of the age restriction on tobacco sales'

(c) The extremitY of the Norwegian han is needlessly 164. Even if display bans could ever be justified, the Norwegian ban packages at the extreme, even on its own terms. In barring any use of brands or display point of sale, the Nonvegian ban exceeds the restrictions imposed in the bans enacted in jurisdictions such as Finland, the uK and lreland'

recently 165. For example, the Constitutional Committee of the Finnish Parliament reviewed a proposalto impose a ban identicalto Norway's' The Committee explained: concluded that such a ban was disproportionate. The Committee

-Theproposeddisptayban...stronglyrestriclsthetrade markholder'srighttoexptoitthispropertyrnbusiness activitY.

- The disptay ban is significant as regards the freedom of expresiion because it together with advertisement ban relevantly restricts an entrepreneur,s possibility to exptoit its trademark as a special characteristic for pioducts offered for sale or otherwise emitted in buslnessactivitytobedistinguishedfromproducfsof others.

- The provision means a heavy restriction on the possibi|itytomarkettheessentialproductgroupsofthe

CommissionuBe!gium[1983]EcR467,atparagraphs5and6:'/nifs of the technical, institutional and political defence the Betgian govemment emphasized first of ail the exteni has not yet been po1sib6 to place the bill difficulties which exptain iii, i, spite of the efforts it has made, it partiament.... those circumsfances may explain incorporating the directivi iiio naiionat nw neroii tne Atthoigh of Belgium's failure to fulfil its the difficulties in applying the directive, they cannot expunge the Kngdom not plead provisions' practices or oiitigatiorr. fne Court h'as consistenlly neid hat a Me'mber State may obtigations under community directives; circumstances rn tfs inteii i,git order to justify i iuitrr" to comply witn az

store and also interferes indirectly in the freedom to engage in commercial activitY'

tnFin|andtobaccois_excepffortobaccomeanttobe usedorally_astimulanttegaltyonsale'Takingthisinto considerition the restrictions of tobacco products' marketing seem unnecessarily strict' Th-e piport:frnafity of the regutation.would he improved alreadyife,g'-acustomerwouldhaveachanceinthe point or sa6 to familiarize himself with a catalogue presentingthetrademarksofthetobaccoproducts sold therd and also take along a printed list on the tobacco productsso|dinthatpointofsale.Assoamendedthe provisioncanbeconsideredtofulfitttherequiremenfss,ef roi tie timiting of the freedom of expression in section 12, subsectionl-oftheConstitutionwhentakingintoaccount espiciatty the impoftant ground rgtating to public health on. tnibaixground of the aran on. An amendment such as fhis is a requ1rement for the draft bilt to be enacted in an ordinary order of enactment'l23 to permit use of the color 166. As a result, the Finnish legislation was amended point of sale'124 Similarly' catalogues with images of packs and trademarks at the but retailers may in lreland and the UK, stocking on visible shelves is forbidden, products upon request' and show a customer a sample pack of available tobacco products may pictorial lists consisting of visual images of packets of the tobacco also be shown to consumers.t'5

medicinal products to be 167. The Court of Justice held an advertising ban for it banned 'factual' disproportionate under Article 36 TFEU to the extent that for example' to pack informative announcements and reference material relating' price lists, provided changes, adverse-reaction warnings, trade catalogues and that they include no product claims''126

finding that the 168. Plaintiff submits that the Finnish constitutional committee's right to exploit his display ban 'sfron gly restricfs the trade marks holder's property,andis,Unnecessarilystrict,app|ieswithfu||forcetotheNonruegian Plaintiff submits ban, which completely prohibits all display of brands' Indeed' the UK, are also that less extreme bans, like those in Finland, lreland and

(emphasis added)' ,t. Opinion of the ConstitutionalCommittee 21t2O1O rd Retail Sale of Tobacco Products and Smoking ,ro Decree of the Ministry of Social Affairs and Health on the Accessories Sections 3A and 38. Act 2009 Section 78' 12s treland: Public Health Act 2004 Section 43 Ss(b). UK: Health paragraphs 36 to 42' 126 Case C-143106, Ludwigs-Apotheke12OOT|ECR l-4133 at 55

disproportionate. There is no empirical evidence justifying such prohibitions. There is no empirical evidence that hiding tobacco packs from view and replacing them with plain signs saying 'tobacco' reduces tobacco consumption. There is no evidence that the supposed benefits of such a measure cannot be achieved through less restrictive measures, such as retail licensing and other proper enforcement of the laws against underage tobacco sales, or restricting the size and/or placement of retail displays 'appropriate for rational sales': on the contrary, these alternative, less restrictive, and more effective means are available.

(d) The WHO Framework Convention

169. The referral order notes the WHO Framework Convention of 21 May 2003 which entered into force in 2005. lt is settled that the Convention does not relieve the State of the prohibition on restrictions of the free movement of goods under Article 11 EEA, or the need to justify such restrictions under Article 13. This Court should make that clear in reply to the referring court'

170. First, and fundamentally, the Convention does not exempt Nonruay from the obligations of the EEA Agreement. The situation is no different than that of the Union and the Member States: lt is settled law that the Member States cannot derogate from the provisions of the TFEU through international agreements subsequent to the TrealY.l27

171. Second, in any case, there is no incompatibility between the Convention and a finding that the display ban contravenes Articles 1 1 and 13 EEA. ln general, the WHO Convention makes clear by its terms that it does not impose any obligation to enact laws contrary to the constitutional order of the State. More particularly here, the WHO does not impose on any State an obligation to enact a display ban. The Convention required, to the extent consistent with each State's constitutional principles, each State to impose an advertising ban. This requirement is set out in Article 13 of the Convention:

127 Opinion 1/g1 of the Court of Justice of 14 December 1991 delivered pursuant to the second subparagraph of the Article 228 (1) of the Treaty. Draft agreement between the Community, on the one hand, and the countries of Area European Fiee Trade Association, o=n the other, relating to the creation of the European Economic [1991] ECR l-6079. 1. Parties recognize that a comprehensive ban on adveftising, promotion and sponsorship would reduce the consumPtion of tobacco Products'

2. Each Party shall, in accordance with its constitution or constituiionat principles, undertake a comprehensive ban of alltobacco advertising, promotion and sponsorship. Thisshatlinclude,subjecttothelegalenvironmentand technical means available to that Party, a comprehensive ban on cross-border adveriising, promotion and sponsorshrp originating trom iti territory' "'128

172.The possibility of imposing a ban on retaildisptay was discussed only in the subsequenl, non-binding guidelinesforthe implementation of Article 13 of Convention. According to the Parties to the Convention, WHO Convention guidelines 'constitute a non-binding instrument adopted by an international body to provide assisfance to countries in addressing specificissues at the national or international level,'1'n Those guidelines are not supported by any evidence that display bans reduce tobacco consumption' ln any event, WHO guidelines are not binding on the Parties to the convention.

io 173. In Case C-19 7108 France v Commission (not yet reported), France sought justify its law requiring minimum retail prices for tobacco products, arguing that WHO Convention specifically recommended that the Parties adopt 'price policies... aimed at reducing tobacco consumption.'. The court of Justice

emphatically rejected this justification :

WithregardtotheWHOConvention,astheAdvocate GeneratstatedinpointsS0andSlofheropinion,that conventionimposes no actual obligation on the Contracting Parties with regard to price policies for tobacco products, ind merety descnbes possib/e approaches by whichtotakeaccountofnationalhealthobjectives con ce rn ing tob acco co ntrol.13o

174. Because the Convention imposed no obligation on the State, the State was bound by EU legislation, and had to justify its measure by showing it was suitable and that the benefits could not be met by less restrictive measures. The Court

128 Emphasis added. 12e for consideration by conference of the parties, First session ,'Additional Matters tdentified in the convention the conference of the Parties, Note by the secretaiat'(emphasis added)' paragraph 45 (emphasis ,.0 Case C-1g7l}g France v Commission, ruling of 4 March 2010, not yet reported, at yet reported, and case C- added). See also case C-2211O8 Commissio n v lreland, ruling of 4 wtarcn ZOtO not are repeated in all three 19g/0g Commission v euiirii, ruling of 4 March 2010, not yet reported. The statements cases. held that the State had failed to make this showing and the measure was therefore unjustified.

175. So too here: the reference to the Convention's non-binding guidelines does not relieve Nonruay of its burden to demonstrate that the display ban is proportionate and justified under Article 13 EEA.

E. Gonclusion on the Second Question

176. Plaintiff submits that the reply to the second question referred should be drafted in the following terms:

Articles 11 and 13 EEA must be interpreted so as fo preclude a general prohibition against the visible display of tobacco products such as that atissue in the main proceedings, unless the referring coutt, having assessed a// the supporting evidence, finds the prohibition iustified in light of the objective of reducing consumption of tobacco products.

It is for the national authorities to submit substantial and specific evidence to show that

- the prohibition is suitable for attaining that obiective, i.e. that the prohibition will reduce consumption of tobacco products and that the benefits of the prohibition are not offset by its unintended consequences; and

- the prohibition does not go beyond what is necessary to attain that obiective and that the actual benefits of the measure (if any) cannot be attained by /ess restrictive alternatives, such as a retail licensing scheme, proper enforcement of a ban on underage tobacco sa/es, or limitations on the size and/or placement of retail displays.

Brussels and Paris 1 9 January 201 1 ?; Magne Juuhl-Langseth Michel Petit (sign.) Avocat I

lo ' 3 t i,,.\ Registered at the OFTA court under 1go ..c-.i6f de;r of r,f-**;;*r;4....r..r, 30J.[...n "".,,,*."0&$ororrr,"o U ATTORNEY GENERAL - CIVIL AFFAIRS

To the EFTA Court Oslo, 19 January 20L1-

WRITTEN OBSERVATIONS

THE NORWEGIAN GOVERNMENT

represented by Ketil B@e Moen and lda Thue, advocates, Office of the Attorney General (CivilAffairs) acting as agents, submitted, pursuant to Article 20 of the Statute and Article 97 of the Rules of Procedure of the EFTA Court, in

Case E-15/10 - Philip Morris Norway AS v. the State represented by the Ministry of Health and Care services

in which Oslo tingrett (Oslo District Court) has requested an advisory opinion pursuant to Article 34 of the Agreement between the EFTA States on the Establishment of a Surveillance Authority and a Court of Justice on the interpretation of Articles lL and L3 of the EEA Agreement in relation to a display ban of tobacco products.

POSTAL ADDRESS: TELEPHONE: + 47 22 99 02 00/20 VISITING ADDRESS: P,O. BOX 8012 DEP TELEFAX: + 47 22 99 02 50 PILESTREDET 19 N.OO3O OSLO, NORWAY E-MAIL: kbm@reqierinqsadvokaten. no JHE ATTORNEY GENERAL (CtvtL AFFATRS) Written Observations in Case E-16/10 Page 2 of 67

TABLE OF CONTENTS

TNTRODUCTTON ...... 4 1.1 The questions to the EFTA Court ...... 4 !.2 The main position of the Norwegian Government...... 5

THE NORWEGTAN TOBACCO pOLtCy...... 6 2.L Introduction...... 6 2.2 Tobacco as a fundamental risk to human health...... 7 2.3 Norwegian strategies to reduce the use of tobacco ...... g 2.3.1 A comprehensive tobacco control po\icy...... 9 2.3.2 Relevont legislotive meosures...... 10 2.3.i Toxotion ...... 11 2.3.4 Communication ond awareness building etc...... 11 2.4 The general prohibition of all advertising of tobacco products...... 12

THE DtSpLAy BAN tN THE TOBACCO CONTROL ACT...... 13 3.1 lntroduction on the display ban in force 1 January 2010...... 13 3.2 The main content of the display ban...... 14 3.3 The derogation for specialist tobacco shops...... ,...... 16 3.4 The objectives of the disptay ban...... 17 3.5 The legislative process leading to the adoption of the display ban ...... 18

ADVERTTSTNG OF TOBACCO WtTHtN THE EU/EEA AND THE WHO ...... 21 4.1 Introduction...... 2t 4.2 EU policy on tobacco advertising ....,...2t 4.2.L The current legislation and recommendations ...... 21 4.2.2 Further tightening the advertising regulation?...... 25 4.3 EU and EEA States with a display ban...... 26

ti'i r;:ni,',,,' 4.3.4 Finland...... 28 4.3.5 Other stotes ...... 28 4.3,6 Comporison ...... 29 4.4 WHO policy on advertising and display bans...... 29 4.5 States outside the EEA with a display ban...... 32

QUESTTON NO 1...... 33 5.1 Introduction ...... 33 5.2 There is no discrimination ...... 35 5.3 Market access is not prevented ...... 39 5.4 The alternative position: Market access is not hindered ...... 42 5.5 Answer to question no 1...... 44

QUESTION NO 2...... 44 6.1 Introduction ...... 44 6.2 Legitimate objectives ...... 46 6.3 The Proportionality test - burden of proof etc...... ,,..,.,..., 4l THE ATTORNEY GENERAL (ClVtL AFFATRS) Written Observations in Case E-16/10 Page 3 of67

6.4 Suitability...... 49 6.4.1 The suitability test...... 49 6.4.2 Expected effects of the display ban - an outline...... 51 6.4,3 WHO assessment of disploy bon effects ...... 52 6.4.4 RAND (2010) on display ban effects...... 53 6.4.5 S/RUS (2008) and SIRUS (2010) on display bon effects ...... 54 6.4.6 The approach by the Plointiff ond the tobacco industry in general...... 58 6.4.7 Concluding remarks on suitabi1ity...... 61 6.5 Necessity ...... 61 6.5.L The necessity test - introduction ...... 61 6.5.2 Burden of proof etc ...... 62 6.5.3 Alternotives to the disploy ban ...... 64 6.5.4 Concluding remorks on necessity ...... 66

7 ANSWERS TO THE QUEST|ONS...... 66 THE ATTORNEY GENERAL (CIVIL AFFAIRS) Written Observations in Case E-16/10 Page 4 of67

INTRODUCTION

1.1 The questions to the EFTA Court

'J.. Oslo tingrett (Oslo District Court) has, by a reference dated 12 October 2010, requested the EFTA Court (hereinafter "the Court") to give an advisory opinion on two questions regarding the conditions under which a ban on the visible display of tobacco products at retail outlets is compatible with the EEA Agreement. The questions read, as translated by the EFTA Court:

L. Shall Article LL of the EEA Agreement be understood to meon that o general prohibition ogoinst the visible disploy of tobocco products constitutes o meosure having equivolent effect to a quontitotive restriction on the free movement of goods?

2. Assuming there is o restriction, which criterio would be decisive to iletermine whether a display prohibition, based on the objective of reduced tobocco use by the public in general ond especially omongst young people, would be suitoble and necessory having regord to public health?

2. Oslo tingrett has specified that the request is forwarded in order to receive guidance for its decision on whether Articles 11 and 13 of the EEA Agreement preclude a rule prohibiting the visible display of tobacco products at retail outlets as laid down in Section 5 of the Norwegian Act relating to Prevention of the Harmful Effects of Tobacco (hereinafter "th'e Tobacco Control Act")1. Philip Morris Norway AS, the world's largest tobacco company, has sued the Norwegian state claiming that the ban is incompatible with the said EEA law provisions.

3. The time limit for written observations to the EFTA Court is set at 19 January 2011. The Norwegian state, represented by the Ministry of Health and Care Services (hereinafter "the Ministry of Health"), acting as Defendant, hereby submits its written observations. The positions of the Norwegian state will be referred to as the positions of "the Norwegian Government" or "the Government".

4, Before assessing the two questions in detail in sections 5 and 6 below, it seems appropriate to present essential background information. First, important elements of the Norwegian tobacco policy will be outlined, followed by a more detailed description of the Norwegian display ban on tobacco products (sections 2 and 3, respectively). Thereafter, the Government will provide an overview of relevant tobacco related legislation and recommendations within the EU/EEA and the World Health Organization, together with recent legislation on display bans in other EU and EEA States (section a). The Government's suggestions for appropriate answers to Oslo tingrett are set out in section 7.

5. Before commencing with the Norwegian tobacco policy, the Government will present its main position on the key issues of the case.

'Lovomvernmottobakksskaderg.mars 1973nr. 14(tobakksskadeloven).ForanupdatedtextinEnglish,see Annex No I and the web page of the Ministry of Health http://www.regierineen.no/enldep/hod/ Subjeits/the- department-of-public-healtlr/norways-national-strateg]r-for-tobacco-co.html?id:45 1948. rHE ATTORNEY cENERAL (CtVtL AFFATRS) Written Observations in Case E-16/10 Page 5 of67

L.2 The main position of the Norwegian Government

6. The Norwegian Government is of the opinion that the display ban constitutes an important measure in order to further reduce tobacco use in general and smoking in particular. lt is in line with WHO law, with recommendations from the EU legislator and with new legislation in other EU and EEA States, and it is substantiated by extensive research. There is no reason to question that the removal of visible tobacco products from retail outlets will contribute to attaining the public health objective in a similar way as the ban on other advertising strategies. A display ban as the one provided for in the Tobacco Control Act is hence fully compatible with EEA law.

7. The Government submits that the display ban is a non-discriminatory selling arrangement falling outside the scope of Article 11 EEA, see section 5 below. Hence, question No l from the referring court must be answered in the negative. Indeed, the Government fails to see any discriminatory element inherent in the display ban (section 5.2, in particular). Moreover, market access for tobacco products will not be prevented by the display ban, neither for existing nor for new products (section 5.3),

8. Indeed, the display ban is substantiated by public health objectives. lt is suitable and necessary in order to fulfil these objectives, see section 6 below concerning question No 2 from the referring court.

9. The objective of the display ban is reduced tobacco use in the population in general and amongst young people in particular (sections 3.4 and 6.2,in particular). lt is expected that the display ban will have an effect primarily on young persons and on persons who are considering or trying to quit smoking or who have recently quit smoking, but also - albeit to a lesser extent - to the population as a whole. The effects will probably arise gradually over some time.

10. As it is for the national court to assess the proportionality of the display ban, the EFTA Court should in principle focus on the relevant tests, i.e. those of suitability and necessity. lt is in this regard paramount to acknowledge the specific sector and case concerned (sections 6,1 and 6.3, in particular). The EEA State will in the present case have a margin of discretion in determining both the level of protection and the means by which this level of protection is to be achieved. In addition, there are particular difficulties in predicting the exact effect of a single tobacco control measure that works together with other measures

1.1,. Accordingly, and in line with case law from the ECJ and the EFTA Court, the essence of the suitability test is whether it is reasonable to assume that the display ban will have effect in the short or somewhat longer term (sections 6.3 and 6.4.L, in particular). A suitable display ban will be compatible with EEA law unless it is apparent that the protection of public health can be secured equally effectively for the groups targeted by the display ban by measures having less effect on intra-EEA trade (section 6.5.2, in particular).

12. Despite this being the essence of the questions to be assessed by the EFTA Court, the Government finds it appropriate to provide further information and a more comprehensive analysis on inter olio the health risks of tobacco use (section 2.1), on the Norwegian tobacco policy in general (section 21, on the display ban more concretely (section 3), on relevant EU/EEA law and display ban regulations in other states (sections 4.2 and 4.3), on WHO law (section 4.4), and on the evidence substantiating that the display ban is indeed suitable (section 6.4) and necessary (section 6.5). Extensive research clearly indicates that a display ban THE ATTORNEY GENEML (CIVIL AFFAIRS) Written Observations in Case E-16/10 Page 6 of67

will be effective for both young people and - presumably to a somewhat lesser extent - for adufts. Some of these research documents are set out in sections 6.4.2-6.2.5 below.

13. It is significant to note that the parties to the WHo Framework Convention of Tobacco Control, which includes the European Union as such and all but one EU Member State, have stated that the display of tobacco products is a key advertising instrument that should be banned in all states (section 4.4 below and inter o/ia Annex 8 and Annex 9 to these observations). This understanding, and the research relied upon within the WHO system, are among the elements substantiating the proportionality of display bans.

1.4. These rather comprehensive written observations also seem warranted due to the broad attack on display ban regulations from the tobacco industry. As held below (e.g. in section 4.3), legal proceedings have been initiated in several states, and the industry (philip Morris in the present case) presents a number of arguments and evidence in an effort to question the legality of display bans. This evidence is, in the Government's opinion, clearly unfounded, but it nevertheless needs to be addressed. lt seems rather paradoxical that the industry, whose public health record is not very impressing, now argues that the display ban is not sufficiently efficient in ensuring higher health standards.

L5. Finally, the broad approach of in these observations is also chosen because this is the only case of the several proceedings in EU/EEA States that, as far as the Government as aware of, has been referred to one of the Luxembourg courts.

THE NORWEGIAN TOBACCO POTICY

2.1 lntroduction

rb. Norway has for several decades carried out a consistent and strict tobacco policy and is among the leading states in forming policy measures to reduce tobacco use. Norway was for instance the first state to ratify the WHO Framework Convention on Tobacco Control in 2003. The history of the tobacco control policy clearly demonstrates that a number of strict measures have to be enacted simultaneously before such policies in sum can successfully challenge the tobacco industry's determined efforts to increase sales or - at least - to maintain their market positions. This need for a comprehensive tobacco control policy is due to a lot of factors, including the addictiveness inherent in tobacco products.

17. Advertisement for tobacco products and the brand image that the industry seeks to establish are key factors in their marketing strategies. Hence, among the fundamental strategies of responsible governments is the introduction of a comprehensive ban of all forms of advertising for tobacco products. As traditional advertising through television, radio and printed media is largely prohibited within the EEA, the mere visibility of the tobacco products, with its trademarks, colours etc., has become increasingly important to the industry. This is widely acknowledges by e.g. the World Health Organization, by the EU legislator, by researchers and by the industry itself.2 The display of tobacco products placed in large numbers by the counters in the outlets - so called "power walls" - clearly has an advertising effect as it triggers customers to buy tobacco products. Banning the visible display of tobacco'products is hence an integrated part of the ban on advertising and a means to make this ban more complete and thereby also more efficient.

' See further below, sections 6.2 and 6.4.6 in particular. trHE ATTORNEy GENERAL (CtvtL AFFATRS) Written Observations in Case E-16/10 Page 7 of67

18. The Government finds it appropriate to present an overview of relevant parts of the Norwegian tobacco policy here in section 2, thereby supplementing the reference for an advisory opinion on some points, before elaborating further on the display ban more concretely in section 3.

2.2 Tobacco as a fundamental risk to human health

19. First, however, it must be recalled that tobacco use - undisputedly - is a fundamental risk to human health. In Norway, about 6 700 persons die annually as a consequence of smoking, and this amounts to approximately L6% of all deaths. Each death leads to an average loss of 11 years of life. In addition, several hundred people die each year due to diseases caused by exposure to second hand smoke.'These numbers are in line with the EU figures indicating that approximately 15% of all deaths are caused by active smoking (650 OOO deaths in 2000) and approximately one additional percentage by passive smoking (79 000 deaths).4

20. On a global level, the World Health Organization has estimated the number of deaths caused by smoking to more than 5 million per year,t Approximately I% of global mortality is due to second hand smoke.6 Smoking is among the most important risk factor for death in all parts of the world, and it is the single-most important factor in high-income countries - to which Norway belongs - both as regards number of deaths and as regards number of lost years and years with chronic diseases (so called "Disability Adjusted Life Years", DALY). The following numbers for deaths and DALYs for high-income countries are provided in the WHO Global Health Risks report for 2OO9:7

Ranking (for Risk factors Deaths (in millions and DALYs (in millions and deaths and percentages of total) percentage oftotal) DALYs) I-I Tobacco use L.>- Ll-9-/o L3 - 1,0.7% 2-4 High blood 1.4 - 16.8% 7 -6.r% pressure 3-3 Overveight and 0.78 - 8.4% 8-6.s% obesity 4-6 Physical inactivitv 0.6 -7.7% 5 - 4.L% 5-5 High blood 0.6 -7.O% 6 - 4.9% glucose 6-7 High cholesterol 0.5 - s.8% 4-3.4% t-ru Low fruit and 4.2-2.5% 2-13% vesetable intake 8- Urban outdoor air 0.2-25% pollution 9-2 Alcohol use 0.1- 7.6% 8 - 6.7% 10-9 Occupational risks 0.L - 11% 2-I.5%

3 Vollset et al, Hvor dodetig er royking? FHI rapport 2006:4,see http://www.flri.no/dav/F96A862E2C.pdf. - RAND Europe, Assessing the Impacts of Revising the Tobacco Product Directive, Sept 2010, p. xxi and p. I with further references, available here http://ec.europa.eu/health/tobacco/docs/tobacco_ia_rand_en.pdf . Relevant parts of the report - hereinafter "RAND (20 I 0)', - is enclosed as Annex No 2. ' WHO, Global Health Risks. Mortality and burden of disease attributable to selected major risla (2009), see [p://www.who.int/healthinfo/global-burden_disease/GlobalHealthRisks_report_full.pdf.://www.who.i 6berg et al, Worldwide burden of disease from exposure to second-hani*okiiTJ*tpe'ctive analysis of data from I 92 countries, The Lancet, Early Online Publication 2010 Nov 26, see fSHS ' WHO, Global Health Rrs*s pp. I 1- 12. See also RAND (20 l0) p. 5 I for numbers from the EU Member States. 8 As far as DALYs is concerned, the factor "illicit drugs" is .unt"a as factor number eight, whereas outdoor pollution does not figure on the list of the ten most important factors. rHE ATTORNEy cENERAL (CtvtL AFFATRS) Written Observations in Case E-16/10 Page 8 of67

21. Tobacco use is hence also regarded as the largest ovoidable cause of premature death.s

22. The negative health impacts of tobacco use are very wellestablished and not contested in the present case. Smoking in particular is the cause of inter olio several forms of cancer, the most important being lung cancerto, chronic respiratory diseases (such as COPD11), cardiovascular diseases (such as thrombosis) and negative reproductive effects.12

23. Most developed countries have during the last decades made extensive efforts to reduce tobacco use. Even though there are differences between states, there has in general been a gradual but slow decrease in tobacco use in most high-income countries during the last L0-15 years,l3 also in Norway. ln 2009, the smoking prevalence for both men and women in Norway reached an all-time low of ZIYo, very close to the stated target of 20% set for 2010 by the National Strategy for Tobacco Control for 2006-2010.t0 ln addition, smoking prevalence among young people nearly halved between 2002 and 2007. A negative trend is, however, that there has been an increase in the use of the Scandinavian-type smokelesstobacco (hereinafteroften only "snus") during recent years.

24. The general trend for tobacco smoking prevalence in Norway for the period 1999 - 2009 looks like this:1s

Percenlaue stnokers {per cetlt}, ltytitn€. Perce|ltflUe (laily snlokers, Totnl, Tolal 16-7,1 years.

30 2B 26 24 22 20 E 1B 0 o 16 6 a 14 1? 10 I 6 4

ztoo 2oo1 2ao2 2008 2009 S ou rc e:,Statjstrb,s N arway

' WHO, Report on the Global Tobacco Epidemic (2009) p. 8, see http://whqlibdoc.who.inVpublications/ 2008/9789241596282 eng.pdf , hereinafter "WHO (2009)"; Council Recommendation2003/54/EC, OJ 2003 L 22 p. 3l, see http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2003:022:003 l:0034:EN:PDF; and Nasjonalt folkehelseinstitutt, Folkehelserapport 2010. Helsetilstanden i Norge. Rapport 2010:2 p. 102, see http://www.fti.no/dav/0161795966.pdf. Relevant parts of WHO (2009) are enclosed as Annex No 3, and_ Recommendation2003l54lEC is enclosed as Annex No 4. r0 Smoking is the main cause for about 85%o of l,rng.u"""r in Norway. " Chronic Obstructive Pulmonary Disease. t' See e.g. WHO Gtobat HealthRrs*s p. 21 andRAND (2010) p. xxi and pp. 45-51. '' See e.g. RAND (2010) pp.29 et seq. to Norway's National Strategy for Tobacco Control 2006-2010,p. 20 in abbreviated version in English, see h=ttp://www.regjerin 2OStrategy.pdf. '' Statistisk sentralbyrA, www.ssb.no. The statistics for 2010 are not yet available. THE ATTORNEY GENERAL (CIVIL AFFAIRS) Written Observations in Case E-16/10 Page 9 of67

25. Due to the long time lags for development of cancers and chronic respiratory diseases etc. the statistics of health problems in the population has not yet shown a similar decreasing trend.

zo. In recent years, the use of snus has, as mentioned, increased quite dramatically in Norway, especially among young men. The Norwegian health authorities believe that the development of many new snus-products containing a variety of taste additives (such as chocolate) and attractive design (such as colourful design boxes) has contributed to this increase. Although snus is less harmful than smoking tobacco, it causes cancer in several organ systems and also increases the risk of vascular diseases.ls

27. There is no doubt that tobacco is particularly addictive, caused primarily by nicotine. Any efforts to reduce tobacco-related disease must take into account the addiction potential of a tobacco product. Nicotine even exceeds drugs such as heroin and cocaine in creating dependence among users. Most smokers do not smoke out of choice, but because they are addicted to nicotine.lt Of those individuals who have ever tried smoking, about one-third becomes daily smokers. Of those smokers who try to quit, less than five percent are successful. Although not all smokers become nicotine dependent, the prevalence of individuals diagnosed as addicted to nicotine is higher than for any other substance.l8

28. Tobacco-related diseases incur considerable direct and indirect costs for society, including direct healthcare costs, indirect costs such as productivity losses, welfare provision costs, fires and other accidents, as well as intangible costs such as pain and suffering. In the EU, these costs have been estimated to be up to €363 billion in 2000, corresponding to 3.9% of EIJ-27 GDP1e. In Norway, the costs for society of smoking has in 2010 been estimated to 80 billion NOK per year (approximately 10 billion €), and for second hand smoking approximately 4 billion NOK per year. The potential gain for society of a further decline in smoking prevalence has been estimated to 2-3 billion NOK peryear per percentage point reduction in smoking.2o

2.3 Norwegian strategies to reduce the use of tobacco

2.3.7 A comprehensive tobocco control policy

29. Evidence based research and experience through decades have demonstrated that the greatest health impacts of tobacco control policy are achieved by implementing a comprehensive and diversified policy.

30. Norway initiated its anti-tobacco programme in 1965 when the Storting (the Norwegian Parliament) appointed an interdisciplinary committee to investigate what measures could be implemented to combat the health problems caused by tobacco use. This work culminated in the adoption of Act of 9 March 1973 No 14 relating to the Prevention of the Harmful Effects of

'o Holm et al, Snus does not save lives: quitting smoking does!Tobacco Control 2009;18:250-251, with further references, see htlp://tobaccocontrol.bmj.com/content/l 8/4/250.extract. " Tobacco Advisory Group of the Royal College of Physicians, Nicotine addiction in Britain,London (2000). '" The Surgeon General, U.S. Department of Health and Human Service, Public Health Service, Office of the Surgeon General, How Tobacco Smoke Causes Disease: The biolog and behavioural basis for smoking- attributable disease, Rockville (20 l0). '' RAND (2010) p. xxi. '" Se lensminde and Torkilseng, Samfunnsokonomiske kostnader av rayking - En vurdering av metodikk og ko s t nadenes s torr el s es or den, Rapport IS- 1 825, Helsedirektoratet 20 I 0, see http://www.helsedirektoratet.no/vp/multimedia/archive/003 12lIS- I 825 Samfunns_ko 3 l 2409a.pdf. THE ATTORNEY cENERAL (ClVtL AFFATRS) Written Observations in Case E-16/10 Page 10 of67

Tobacco (the Tobacco Control Act) which came into force L January 1975. In the 35 years that has followed, increasingly more measures have been introduced to further strengthen the tobacco policy.

31. When the Tobacco Control Act was introduced, it was emphasised that restrictive legislation and taxation were important measures, but that also other elements, such as information, education and cessation activities, were vital parts of a comprehensive and efficient program. There must be a balance between different measures, and they must be comprehensive in order to avoid the industry from being able to easily circumvent the objective of reducing tobacco use. This is still the Government's position. The said elements are underlined in tobacco strategy documents from the last decade. As held in the National strategy for Tobacco Control 2006-2010, the main goalof the tobacco policy is to promote health in allsegments of the population and to ensure more years of healthy life by reducing the use of tobacco. Reducing tobacco use is mainly done in two ways; preventing the uptake of tobacco use; and encouraging smoking cessation.

2.3.2 Relevqntlegislotive meosures

32. The Government finds it appropriate to briefly mention a selection of legislative measures in order to reduce tobacco use without going into any details. The overview is hence not exhaustive. Some of the measures implement minimum requirements set out in secondary EEA legislation. However, they have often been implemented much earlier in Norway than required by EEA legislation, and still today several measures imply a more coherent and strict regulation than the EEA minimum.2l

33. A comprehensive ban on all advertising for tobacco products in printed media as well as on television and radio was a key measure from the beginning in 1975 (today's Tobacco Control Act section 4). This advertising ban was later strengthened inter olio by clarifying that also indirect advertising was prohibited (in 1997) and by the display ban as from 1 January 2010 (Tobacco Control Act section 5). The display ban should be seen as an integral part of the ban on advertising, and the general advertising ban therefore represents important background information, see section 2.4 below. Any kind of giving tobacco products out for free (section 6) as wellas the sale of tobacco products with a discount (section 7) is prohibited.

34. When it comes more concretely to the sales situation, the Tobacco Control Act from 1975 introduced a L6 years age limit for buying tobacco. This limit was raised to 18 years in 1996 together with the same age requirement for sellers of tobacco (Tobacco Control Act section 11). Sales from self-service automates (vending machines) were banned as from L995 (Tobacco ControlAct section 8)". As held in section 2.'J.of the reference from Oslo tingrett it is estimated that there are between 15.000 and 18.000 sales outlets in total. lt is however currently under evaluation whether to introduce a licensing system for the sale of tobacco products that would substantially limit the number of outlets, indicated to about one third of today's number. The proposal is presented by the Directorate of Health and is now further

t' A more complete advertising ban (e.g. indirect advertising, advertising in cinemas, on billboards etc.), age limits, ban on self service vending machines, ban on providing free samples and of rebates, smokefree areas and pjctorial warnings. " These are other kinds of vending machines than those permitted today, the latter (and legal ones) only being an instrument to give the tobacco product to the customer after having purchased the product at the counter (with age control etc.), see also section 3.2 below. THE ATTORNEY GENERAL (CIVIL AFFAIRS) Written Observations in Case E-16/10 Page 11 of67

assessed by the Ministry of Health.23 The proposal has already been criticized by the tobacco industry, presumably because it would be an efficient means to lower their sales numbers.

35' The Tobacco Control Act introduced requirements related to labelling in 1975, requirements that have gradually been strengthened. This relates inter olia to increasingly bigger health warnings on the packages, requirements concerning a declaration of content on all cigarette packages, and prohibitions of any indication to the effect that the product is less harmfulthan other tobacco products (with terms such as "light" etc.), see the Tobacco Control Act section g. With effect from June 2011 there have been adopted requirements related to pictorial warnings on tobacco products.2a

36' Another tendency is increasing focus on creating smoke-free environments, protecting both the active and passive smokers. Such environments are inter o/io public localities and transportation, schools, restaurants etc. The regulations of restaurants and bars illustrate the approach of gradually strengthening the regulations. Smoking was prohibited in one third of the area of the restaurant/bar in 1,993, in half of the area in 199g and in all parts of the establishment in 2003 (in effect from 2004). This is one of the examples where Norway has clearly been in front of the general development. Several EU States have, however, followed Norway's example (partly or totally) on this point during the last few years.

2.3.3 Toxotion

37 ' Taxation of tobacco products constitutes one important instrument in reducing tobacco sales. Cigarettes cost comparatively more in Norway than in most other countries, also after controlling for spending power. Close to 80% of the final retail price of tobacco products sold in Norway consists of taxes. This is partly a specific and fixed excise duty that is regulated every year in the national budget, and partly the general 25% vAT. The estimated tobacco tax revenue f or 2O1J is NOK 8 billion (not including VAT).25

2.3.4 Communicotion and oworeness buildinq etc.

38, As mentioned above, communication and awareness building are essential elements of a comprehensive tobacco policy. Such instruments contribute to a better understanding of and can change attitudes towards tobacco as a particularly addictive and harmful product and may curb smoking initiation and encourage cessation. Norway has over the years since the 1970s had several larger media campaigns as well as consistently informed about tobacco control issues through other channels (in schools etc.).

" For information, see e.g. hftp://www.aftenposten.no/ol

2.4 The general prohibition of all advertising of tobacco products

39. The general tobacco advertising prohibition in Norway is outlined in section 2.2 of the reference for an advisory opinion. lt is important to emphasise that the Plaintiff does not dispute the legality of this general ban on advertising under EEA law. Hence, the dispute before Oslo tingrett and the request for an advisory opinion does not concern this issue.26 lt is nevertheless relevant to outline the advertising ban as the display ban forms an integral part of the general ban on advertising and a clarification of the extent of this advertising ban.

40. As held above, Norway has had a total prohibition against advertising of tobacco products since 1975. The prohibition was previously established in Section 2 of the Act of the Tobacco Control Act), being as of 2009 placed under Section 4 of the same Act. Section 4, first and second paragraphs, of the Tobacco Control Act reads:

"All forms of odvertising of tobocco products ore prohibited. The some opplies to pipes, cigarette poper, cigarette rollers and other smoking devices.

Tobacco products must not be included in the odvertising of other goods or services."

41-. This general advertising prohibition has since 1975 applied to all forms of marketing in all kinds of media, including newspapers, radio, television and posters. The term advertising, including indirect advertising, has been further clarified in Regulations on the prohibition of advertising of tobacco products etc. (Advertising Regulations) section 4:27

"b) Advertising: Mass communication for marketing purposes, inctuding pictures of brond nomes ond trademarks (logos, symbols, nomes etc.), posters, signs or similar devices, disploys, low-price odvertising, as well os the distribution of printed motter, product samples, etc. to consumers.

c) lndirect advertising of tobocco products: 7. The use of a brond ndme or trodemork that is mainly known as a brand nome or trademork for tobacco products in the advertising of other products ond services 2. The lounching of tobacco products with the oid ol o brand nome or trqdemark thot is known os, or is in use os, o brond nome or trodemark for other products ond services 3. The use of certain colours and loyouts/designs thot ore associoted with particular tobacco products 4. The use of tobocco products ond smoking situotions in the advertising of other products dnd services."

42, Hence, the prohibition is comprehensive and covers both direct and indirect product advertising, including the depiction of a trademark or logo which is mainly associated with tobacco products.

tu This is very clear from the reference sections 2.2 and4.1. However, for some reason, there has been added a parentheses in the EFTA Court's translation in section 2.2 with the text "[under national law]" that could be mtsread so that it is (only) under nationallaw that the Plaintiff accepts the legality of the advertising ban. " Regulations l5 December 1995 No 989 as later amended, see httP://www.r"eeier:ingen.no/paees/l 5255680/Regulations_on the_prohibition oladvertisinq_ofuobaccoJ)roduc li-adl. T'HE ATTORNEY GENERAL (CIVIL AFFAIRS) Written Observations in Case E-l6/10 Page 13 of67

43. All advertising at retail outlets was and is prohibited, including posters and similar objects at the cash register or in other places in the shop's premises with a depiction of the trademark, logo and/or characteristics of the product. For instance, the advertising prohibition has precluded price lists or other information brochures etc. with pictures of tobacco products.2s On this point regarding points-of-sales advertising, the advertising ban has been more comprehensive than in some other countries.2e

44, It is also important to note that trademarks, logos and/or other characteristics of the product as such are seen as advertising. The legislator had therefore, prior to the introduction of the display ban, acknowledged the advertising effects of the mere presence of tobacco products. The legality of displaying tobacco products in the outlets was therefore dependent on a derogation from the advertising ban for the "display of tobacco products inside the sales outlets to the extent that such a display is appropriate for rational sales arrangements."30

45. It was also clear - prior to the display ban legislation - that depiction of tobacco products, the trademark and/or logo on the lnternet was prohibited. This follows from the definition of advertising cited above. The Plaintiff's indication to the opposite3l is unfounded. The Directorate of Health had in several decisions under the traditional advertising prohibition clarified that any form of direct or indirect advertising on the Internet, including the presentation of pictures and trademarks, was prohibited.3'The Market Council (Markedsridet) has ruled in the same way in a case were an alcohol importer published pictures of their products on the Internet.33

46. Moreover, as held above, it has for some time been clarified in the Tobacco Control Act that any kind of giving tobacco products out for free (section 6) and the sale of tobacco products with a discount (section 7) is prohibited. Such actions should be seen as promotion strategies that hence fall under the general advertising ban.

THE DISPLAY BAN IN THE TOBACCO CONTROL ACT

3.1 Introduction on the display ban in force I January 2010

47. The display ban, that forms the concrete basis for the dispute before Oslo tingrett, was adopted by the Storting (the Norwegian Parliament) by Act 3 April 2009 amending the Tobacco Control Act, and came into force on 1 January 2010. The essence of the display ban is, as held above, to limit the advertising effect caused by the presence of tobacco products in the retail outlets. The display ban and its objectives are set out quite comprehensively in the reference for an advisory opinion, in particular sections 2.3 and 2.4. For the sake of completeness these written observations will reiterate the essential points, but also clarify some further aspects of the display ban regulation. t8 Tobacco Control Act Section 4, cf. Advertising Regulations Section 4 b). Pictures of tobacco products constitute advertising according to administrative practice also without kademarks or logos ris the list in the cited letter b) in Article 4 is non-exhaustive. 2e See section 4.2.1 in fine below on different approaches within the European Union. '" Advertising Regulation Section 8(5) as applied prior to the display ban. This provision was is today only applicable to specialist tobacco shops, see section 3.3 below. '' See section 2.3 of the reference from Oslo tingrett. 32 As stated in Proposition to the Odelsting No tS IZOO8-2009) on p. 15 there is long and consistent administrative practice to this effect. The Proposition No 18 is enclosed as Annex No 5 (in Norwegian). See lr-ttp://www.regiering 84/PDFS/orP2008200900I8000DDDpDFS.pdfl " Market Council Case 14104 of 4 November 2005 and Proposition No l8 p. 35-36 on indirect advertising. THE ATTORNEY GENERAL (CIVIL AFFAIRS) Written Observations in Case E-16/10 Page 14 of 67

48. The key legislative provision is section 5 of the amended Tobacco Control Act, cited by Oslo tingrett (as translated by the EFTA Court):

"9 5. Prohibition agoinst the visible display of tobacco products and smoking devices The visible display of tobacco products ond smoking devices at retail outlets is forbidden. The same applies to imitations of such products and to token cards which give the customer occess to acquire tobacco products or smoking devices from vending machines.

The prohibition in the first parogroph does not opply to dedicated tobacco boutiques.

At the retoil outlets it is ollowed to provide neutrol information regording the price ond which tobocco products ore for sole at the premises. The some appties to smoking devices.

The Ministry can through regulotions provide for rules on the implementation and supplementing of these provisions and provide exemptions from such.,,

49. The content of this display ban is further commented in section 3.2, the objectives of the ban are set out in section 3.3 and the legislative procedure in section 3.4.

3.2 The main content of the display ban

50. The display ban forms a consistent and strict regulation of the visible display of tobacco products.

51, First, the display ban relates to all forms of tobacco products and smoking devices. Tobacco products are defined in Section 2 of the Tobacco ControlAct as products that can be "smoked, sniffed, sucked or chewed, provided that they, wholly or partly, consist of tobacco."3a The ban applies irrespective of the origin of the products.

52. Second, the display ban applies to all kinds of visible display of such products and devices as well as imitations of such products and token cards used for acquiring tobacco products and smoking devices from vending machines, see Section 5, first paragraph.ts

53. Third, the general rule is that the display ban applies to all retail outlets. However, there is a limited exception for specialist tobacco shops, see section 3.3 below.

54. Fourth, catalogues or lists displaying pictures of tobacco products ortrademarks/logos are not permitted. This was, however, also prohibited under the general advertising ban prior to the introduction of the display ban, see section 2.4 above. What rs accepted under the present legislation is to present "neutral information regarding the price and which tobacco products are for sale at the premises", see Section 5, third paragraph. The same applies to information on available smoking devices. Any other information than neutral information regarding price and available products is prohibited

55. It is clarified in the proposition to the Parliament - Proposition to the Odelsting No 18 (2008- 2009), hereinafter only "Proposition No 18" - that neutral price lists may only be used for

3o The EFTA Court's translation. 35 To the extent that vending machines are not prohibited, see Section 8 of the Tobacco Control Act. IHE ATTORNEY cENERAL (CtVtL AFFATRS) Written Observations in Case E-16/10 Page 15 of67

information purposes where the tobacco products are found, typically by the counter. Lists for information purposes must be delimited against lists that constitute advertising. This implies that outlets are prohibited from using large information "lists" or many smaller lists that de facto will function as advertising.36 lt is presently under evaluation by the Ministry of Health whether to adopt more specific regulations clarifying how a neutral price and product list may be designed.

56. Each retail outlet can to a large degree decide how the tobacco products in practice shall be concealed, provided that the customers are effectively hindered from seeing the tobacco products. The products are typically placed under the counter, in closed cupboards or behind curtains or other forms of devices which prevent the tobacco products from being visible. The legislation as it presently stands does not in principle prohibit self service of tobacco products, except for those types of vending machines that have for some years been prohibited.3T The retailoutlet must, if such a self service system is chosen, however ensure that the products are concealed whenever a customer does not collect them. ln practice, self service is to the Government's knowledge not used for cigarettes, save for tax free sales. lt is however used to a certain extent in connection with sales of tobacco for oral use (snus) where the customer can take the tobacco out from an accustomed refrigerator.

57. The display ban hence implies that the product assortment shall be visually concealed except for when the tobacco products are handed out to or collected by the customers. lt does not, however - contrary to the argument of the Plaintiff3s - prevent the customers from, on a concrete request, seeing the products they consider purchasing, for example particular cigarette packages. The display ban affects the general display of the products, but does not prevent the seller from providing guidance to the customer before making a purchase decision. However, the tobacco products must be concealed immediately afterwards to hinder that they are visible in the retail outlet any longer than necessary.

58. The Directorate of Health enforces most of the provisions of the Tobacco Control Act, including the display ban. The Directorate has the legal authority for administrative prosecution and can order corrective actions and set a time-limit for rectification (section L6).3s Decisions regarding the advertising ban and display ban can be appealed to the Market Council, which is an administrative tribunal (section 17). The decisions of the Market Council may be brought before the judiciary for a fulljudicial review.oo

'" Proposition No l8 p. 44. " The legal vending machines today are not self-service machines for the purchase of tobaccb. The customer has to buy the tobacco product at the counter, with age control, concealed products etc., and can thereafter use a card !9 Set tne purchased product out ofa neutral, non-pictured box (the vending machine). 'o Reference for an advisory opinion section 2.3. 3e The Directorate has initiated administrative procedures to retail outlets and industry representatives by informing and interpreting the display ban provisions in approximately 30 cases concerning. To this comes a comprehensive information campaign prior to the adoption of the display ban, see http;//www.helsedirektoratet.no/tobakVlover og_regler/reklamefbrbud/forbud_mot_synlig_opp$il ing_4ltqbg l

3.3 The derogation for specialist tobacco shops

59. The display ban applies as the principal rule to all kinds of outlets selling tobacco. An exception has nevertheless been made for dedicated tobacco shops, see Section 5, second paragraph, of the Tobacco Control Act. These are businesses which mainly sell tobacco products and smoking devices, see Section 2, third paragraph. At such points of sale it is, under further conditions, allowed to display tobacco products and smoking devices inside the premises of the shop.

60. An important element of the rationale for this exception is that such retail outlets are primarily used by customers who, already before entering the premises, are determined to purchase tobacco products. The objective of the display ban, to prevent the visibility of tobacco products from directly or indirectly influencing customers to buy tobacco products, will therefore only to a limited extent be relevant to such specialist shops. The exception was also influences by the parallel exception in lceland, see section 4.3.i. below.

61. The exception for specialist tobacco shops is meant to have a limited scope. The shops in question will, for example, be dedicated tobacco shops within the definition given in the Tobacco Control Act only if the product assortment, other than tobacco products and smoking devices, is very limited. The guiding test is, based on the objective of the display ban, whether the shop is expected to be used by more than a very limited number of customers besides those already committed to buy tobacco products. For instance, shops selling games of chance or fruit fall outside the exception for specialist tobacco shops.ot

62. Even for specialist tobacco shops there is a ban against window exhibitions and against other forms of display of tobacco products which are visible from outside the shop. Such product display would have been contrary to the objective of the display ban. Furthermore, it is emphasized in the preparatory works that, in the same manner as before the introduction of the general display ban, there are limitations related to the size and design of the devices for product placement. Too large or too aggressive displays of tobacco will be regarded as traditionaladvertising ratherthan rationaldisplayforthe purpose of the sale of tobacco in the shop concerned, and hence contrary to the ban on traditional advertising in Section 4 of the Tobacco Control Act.

63. As stated in the reference from Oslo tingrett, there are few dedicated tobacco shops in Norway. There does not exist any precise overview, but the parties have estimated the total number to be between five and ten shops.

64. The exception for specialist tobacco shops concerns the physical display of tobacco products. Hence, the exception does not include websites from which tobacco products are sold. Notably, to show pictures of tobacco products, trademarks or logos on the lnternet is regarded as advertising falling under the general advertising ban in the Tobacco Control Act irrespective of the display ban, see section 2.4 above, lt is therefore misleading when the Plaintiff seems to argue that the display ban is particularly questionable as concerns websites that only or primarily sell tobacco products.

or See Proposition No l8 pp. 16-17. T,HE ATTORNEY GENERAL (CIVIL AFFAIRS) Written Observations in Case E-16/10 Page 17 of67

3.4 The objectives of the display ban

65. The overall objective of the prohibition against the visible display of tobacco products is to reduce tobacco use and thereby also reduce health problems related to tobacco products. The objective is set out in the reference for an advisory opinion section 2.4, primarily with references to Proposition No 18, and shall be clarified further here.

66. This overall objective rests on several undisputed facts that are also emphasised in the said Propositiona2 and cited in section 2.4 of the reference for an advisory opinion. First, tobacco represents one of the biggest health risks in the world. As set out in section 2.2above, use of tobacco is the leading cause of deaths in high income countries. lt is at the same time the cause of massive death that can most easily be addressed by governmental actions. Second, advertising for tobacco products, irrespective of the form of advertisement, increases the use of tobacco, particularly among young people. Accordingly, prohibiting advertisement is an effective tool in reaching the aim of reducing tobacco use and thereby enhancing public heafth, see section 6.4 below, in particular. Third, as further set out inter olia in that same section below, the advertisement regulation is more efficient the stricter it is. The kind of marketing that has in many countries been the only one available during t:ecent years - the visibility of trademarks etc. - has thereby become increasingly important to - and presumably increasingly effective for - the industry,

67. The overall objective of the display ban is set out in section 1.1of the Proposition (on p.5):

"The oim with the prohibition is to limit the odvertisinq effect of the disptay of such products, to contribute to reduced tobocco use and fewer health problems.,,

68, Furtheraspectsof the objective are clarified in section 1.3 of the Proposition (on p.7), cited in the reference from Oslo tingrett and reiterated here:

"The purpose with the Ministry's proposol introducing a prohibition against the visibte disptay of tobacco products and smoking devices dt retdil outlets is ta reduce the omount of smokers and snus users in the populotion in generol ond amongst children and young people especiolly. The ban shall contribute to protect children ond youngsters ogoinst the hormfut heolth effects of tobacco use. A reduction in the number of children ond young people who begin to smoke ond/or use snus will in the future leod to a reduction in the share of odult smokers ond snus users. ln oddition, a prohibition ogoinst the visibte disptay could contribute to moking it eosier for those persons trying to quit or who hove quit smoking tobocco."

69. Hence, the objective is to reduce the use of tobacco products in the population in general and amongst young people in particular. lt is expected that the display ban will have an effect primarily on young persons and on persons who are considering or trying to quit smoking or who have recently quit smoking.

70. ln addition to the more directeffect on tobacco use, it is expected in the preparatory works that removing the products from the counter will contribute to a change in the general attitude towards tobacco products and thereby have a more indirect effect. placing dangerous tobacco products side by side with non-risk products by the counter may mislead the customer into believing that tobacco products are less dangerous than what is in reality the case.a3 Such

a2 E.g. section 1.2 (pp. 6-7), with further references. "' Proposition No l8 section 1.2 (on p. 7) and section 2.3 (onp. 12) THE ATTORNEY GENERAL (ClVtL AFFATRS) Written Observations in Case E-l6/10 Page 18 of67

a signal effect, which is widely recognized in both a research and a legal context,44 is hence an integral part of the display ban that is expected to increase the positive public health consequences of the regulation. The key word often applied is that the display ban will contribute to denormolise the use of tobacco. The effect on the general prevalence of tobacco use in the population as a whole, based inter olio on this signal effect, is expected to appear gradually and after some time.as

7L. lt is also clarified in the cited section 1.3 of the Proposition (on p. 7) that the objective of reducing tobacco use relates to all forms of tobacco products, notably both cigarettes and oral tobacco (snus).

72. The majority of the Storting (the Norwegian Parliament) concurred with the analysis in the Proposition, including the description of the objectives of the display ban regulation.au

3.5 The legislative process leading to the adoption of the display ban

73. A display ban was held as one of several possible new means to reduce the use of tobacco in the document "National strategy for Tobacco Control 2006-201,A", and the Directorate for Health and Social Affairs (now the Directorate of Health) was asked to consider whether to introduce such a ban. A proposal to this effect was suggested by the Directorate on 1 November 2006 as a means to limit the advertising effect caused by the presence of the tobacco products in the retail outlets. Based on the fundamental health risks associated with tobacco use and the well known and positive effects of advertising prohibitions, the Ministry of Health proceeded with the proposal.at

74. The proposal for a display ban was sent on a public hearing in March 2007. Basically, representatives from the tobacco industry and from the commerce expressed negative opinions, arguing inter alia that a substantial health effect was not sufficiently documented, whereas most other parties welcomed a display ban. This included parties such as the Directorate for Health and Social Affairs, the Norwegian Cancer Society (Kreftforeningen), National Council on Tobacco Control (Nasjonalt r6d for tobakksforebygging), the Norwegian Medical Association (Den norske legeforening) and the Norwegian Heart and Lung Patient Organization (Landsforeningen for hjerte- og lungesyke), all arguing that the display ban was expected to be effective. lt was emphasised that the display ban was regarded as particularly effective to reduce tobacco use among young people, but also that it would contribute to denormalise tobacco use.ot

75. The draft legislation was also sent on a separate EEA hearing under Directive 1998fta/EC in December 2007. None of the potentially interested parties (the EFTA Surveillance Authority, the European Commission, EU/EEA States etc.) but one cigar association expressed their opinions in this hearing.oe

76. Following the public hearing the Ministry of Health asked the Norwegian Institute for Alcohol and Drug Research - SIRUS (Statens institutt for rusmiddelforskning) - to draw up a report on

na See sections 6.2 and 6.4.6 below. a5 Proposition No l8 section 2.3 (on p. 13). *u Recommendation to the Odelsting No 49 (2008-2009) section 2, see (in Norwegian) ://www.storti '' See inter aliasection 1.2 (pp. 6-7) of Proposition No 18. a8 See Proposition No l8 section 1.6 (pp, 8-9) and section 2 (pp. 10-11). 49 ,;, Proposition- No 18 section 1.6 (on p. 9). THE ATTORNEY GENERAL (CIVIL AFFAIRS) Written Observations in Case E-16/10 Page 19 of67

the expected effects of the proposed display ban. The letter of assignment was of 1. November 2007 and contained two main elements cited in section 2.4 of the reference from Oslo tingrett; (1) an update on the effects of traditional advertising; and (2) an identification of effect evaluations of the display ban more concretely.so

77. SIRUS is a well respected research institute which is wholly independent as far as concerns research based questions. The institute is, however, organised under the Ministry of Health. SIRUS'particular field of expertise is drug related research in a wide sense, i.e. research policies and health effects of alcohol, tobacco and narcotics.sl

78. SIRUS delivered an extensive report with numerous research references on l March 2008 entitled "The knowledge base for a prohibition on the display of tobacco products"s2. SIRUS has produced an executive summary in English, available on its website. The overall conclusion in this summary reads:ut

"Conclusion The report contends that disploys of tobocco products ore o type of promotional meosure thot works along the some cognitive dimensions os ordinary advertising. lt is, however, difficult to estimote whether the effectiveness of the promotional meosure is greater or less thon ordinary odvertising, ond the extent to which the heolth wornings on the pockage mitigote the pockage's commercial effect.

An overall ossessment bosed on results from research on odvertising effects, consumer psychology theory, o study of impulse buying ofter exposure to tobocco displays, the tobacco industry's research on pockoge design ond the industry's resistonce to the bill to bon visible displays of tobocco products all indicote that the meosure could help reduce smoking in society ot lorge."

79. SIRUS hence concluded that the display of tobacco products would have an effect similar to that of traditional advertising, but that it is difficult to measure the effects more accurately. The more detailed aspects of the SIRUS report, including SIRUS' assessment of existing research and the choice of methodology, are presented in section 6.4.5 below.

80. The Ministry of Health refers to the findings of SIRUS as an important element in concluding that a display ban should be introduced. In addition, the Ministry refers to the fundamental public health risks at stake, the considerable resources invested by the tobacco industry in developing package design to increase sales, and that the packet will have a greater significance as an advertising medium after the introduction of the ban of traditional advertising.to Moreover, reference is made to the introduction of the display ban in lceland and the proposal for such a ban in lreland. The Ministry points out that it is difficult to draw

s0 The English translation of the reference from Oslo tingrett seems slightly inaccurate on this point as it refers to "prospective" effect evaluations. The Norwegian term is eventuelle ffiktevalueringer, i.e. possible evaluations that may exist. '' See the website http://www.sirus.no/eng/. s2 Lund & Rise: Kunnskapsgrunnlaget for forslaget om et forbud mot synlig oppstilling ov tobakhsvarer (2008), available here (in Norwegian): http://www.sirus.no/filestore/ImporlJedlegg/sirusskrifterl .08.pdf. 53http://www.sirus. or'products.E2x322-8_Bp77BFv3TR9D6CJI KXynwiVPL28nMhPLZB9MtlY05hRzOO-.ips, see Annex No 6. 5a E.g. section 1.2 (on p. 6) of Proposition No 18, cited in section 2.4 of the reference for an advisory opinion. TI.IE ATTORNEY GENERAL (CIVIL AFFAIRS) Written Observations in Case E-16/10 Page 20 ol 67

conclusions from the experience in lceland alone as other circumstances may also have affected tobacco habits in the same period.ss

81. The Ministry also discusses, but dismisses, an argument that the display ban will reduce the positive effects of the health warnings on the tobacco packages. lt is held inter olio that the warnings are visible and may function in the same manner as without the display ban as from the time of the purchase.tu

82. As a whole, the Ministry summarizes the expected effect of the proposal in section 2.3 of the Proposal {on p. 13) as follows:

"The Ministry relying on the information summary from SIRUS presumes that ovoiloble information relating to advertising and the effects of advertising hos tronsferoble volue to the visible display of tobacco products. ln the opinion of the Ministry visible disploy constitutes o not insignificont purchose influencing foctor and a prohibition ogainst the visible display will be o suitoble tool to prevent such effects. ln the Ministry's view there is reoson to ossume that o removal of the purchase influencing factar will contribute to o redu,ction in the use of tobacco among children ond young people os well os the generol population. Furthermore, there is reoson to believe that it moy toke time before we con see the effect of o ban ogainst the visible display of tobacco products and that dromatic changes will therefore not toke place in the short term."

83. The Ministry also undertakes a separate assessment of the compatibility of the proposal with EEA law and with the European Convention on Human Rights, see section 6 of Proposition No 18.

84. The parliamentary majority subscribed to the Ministry's assessments reviewed above; see Recommendation to the Odelsting No 49 (2008-2009), point 2. Here the majority stated:

"The majority hos noted thot the intention behind the prohibition is to contribute to protect children and young people agoinst the harmful heolth effects of tobacco use. Section 2 of the Tobocco Control Act provides for o total prohibition ogainst the odvertising of tobocco products and the visible display of tobocco products entails an advertising effect for these products. The mojority ogrees thot a reduction in the number of children ond young people who begin to smoke and/or use snus will, in the long term, lead to o reduction in the share of odult smokers and snus users. ln addition, a prohibition agoinst the visible display of tobacco products moy contribute to making it easier for persons trying to quit or who have quit smoking."

8s. Later experience and research confirm and strengthen the conclusions drawn in 2008 as regards expected effects of a display ban, see section 6.4 in particular.

5s Proposition No 18 section 2.3 (on p. 12). 'o Proposition No 18 section 2.3 (on p. TEIE ATTORNEY GENERAL (CIVIL AFFAIRS) Written Observations in Case E-16/10 Page 21 of 67

ADVERTTSTNG OF TOBACCO WITHtN THE EU/EEA AND THE WHO

4.1 Introduction

86. Advertising of tobacco products is strictly regulated in EU and EEA law. The Community legislator has step by step prohibited different forms of advertising, and is currently considering further steps in order to strengthen public health. One of the proposals is to introduce a general and binding display ban for all EU Member States.

87. The EU policy in this field is outlined in section 4.2 below, followed by ah overview of the display ban legislation in some EU and EEA States in section 4.3. The EU policy is clearly inspired by the extensive work by the World Health Organization (WHO), in particular the Framework Convention on Tobacco Control Article 13 and the Guidelines to this provision decided by consensus among the parties to the Convention in 2008. The relevant WHO sources are cited and further assessed in section 4.4 below.

88. The presentation in section 4 will demonstrate that the Norwegian display ban falls into a clear tendency in further tightening the marketing possibilities for the tobacco industry. Norway is indeed among the frontrunners in the fight against the damaging effects of tobacco use, but this is by no means a solitary run against the principles of EEA law. On the contrary, it is a role encouraged by the EU legislator as well as by the parties to the WHO Framework Convention.

4.2 EU policy on tobacco advertising

4.2.L The current leoislotion ond recommendotions

89. EU and EEA secondary legislation neither requires nor prohibits display bans. lt is however of interest to show the extensive advertising bans within the EEA as well as the express encouragement from the EU legislator for each Member State to further strengthen the ban on advertising.

90. Most forms of traditional marketing of tobacco products are banned within the EU and the EEA. The ban on television advertising is found in Directive 1989/552/EEC Article 13:

"All forms of television odvertising for cigorettes ond other tobocco products sholl be prohibited."

91. It is emphasised in the Preamble that the ban shall include all forms if indirect advertising "using brand names, symbols or other distinctive features of tobacco products or of undertakings whose known or main activities include the production or sale of such products". Hence, the visibility of brand names was already at this early stage conceived as an integrated part of advertisement of tobacco products.

92. The television ban is extended to audiovisual services by Directive 2OO7/65/EC amending d i rective 89 / 552/ EECIEC, see Article 3e( 1X d ).si

93. Comprehensive prohibitions of advertisement in written publications and on the radio are laid down in Directive 2OO3/33/EC. The term advertising is to be interpreted widely, including

" This directive is at present not yet implemented into the EEA Agreement. T|.IE ATTORNEY GENERAL (CIVIL AFFAIRS) Written Observations in Case E-16/10 Page 22 ot 67

"ony form of commerciol communications with the oim or direct or indirect effect of promoting a tobocco product"ss

94. Among the key provisions are Articles 3(1) and 3(2) prohibiting most advertising in the press and other printed publications and in the information society (lnternet etc.), Article 4 prohibiting radio advertising and sponsorship, and Article 5 prohibiting sponsorship of events etc.

95. Moreover, Directive 20OIl37lEC (as later amended) concerning the manufacture, presentation and sale of tobacco contains several provisions affecting the indirect marketing of tobacco products.ss Among these provisions are obligations relating to labelling of each unit packet of tobacco products with written health warnings and optional implementation of pictorial warnings (Article 5)to and a prohibition of any kind of indication to the effect that "a particular tobacco product is less harmful than others" (Article 7). Such labelling, for instance with the terms "light" or "mild", is regarded as misleading, and it may undermine, the health based intentions of the Directive.6l The Directive also prohibits the placing on the market of tobacco for oral use (snus) (Article 8).6'z

96. These strict prohibitions are minimum requirements, only. lt is emphasised that each state may operate with stricter regulations provided that the general EU law is respected, see Article 13(2) of Directive 2001./37 lEC : "This Directive sholl not offect the right of Member States to keep or introduce, in occordonce with the Treaty, more stringent rules concerning the manufocture, import, sale ond consumption of tobacco products which they deem necessary in order to protect public heolth, in-so-for as such rules do not prejudice the rules laid down in this Directive."

97. The freedom to establish separate rules on other forms of advertising than those directly regulated by the directives is stated in the Preamble of Directive 2003/33/EC:

"(12) (...) Other forms of advertising, such as indirect advertising, os well as the sponsorship of events or activities without cross-border effects, fall outside the scope of this Directive. Subject to the Treaty, Member States retoin the competence to regulate these motters os they deem necessory to gudrontee the protection of humon heolth."

98. Additionally, both the Council and the European Commission have on several occasions applauded Member States introducing stricter regulations than the minimum requirements of the directives. The following statement by the Commission in its report on the implementation of the Tobacco Advertising Directive (2003/33/EC) is illustrative:53

tt Article 21b;. se The Directive also regulates inter alia maximum TNCO yields. 60 The provision on pictorial warnings relates to cigarette packets only, see Commission Decision 2003/641/EC. 6t Preamble point2T: "The use on tobacco product packaging ofcertain texts, such as "low-tar", "light", "ultra- light", "mild", names, pictures andfigurative or other signs, may mislead the consumer into the belief that such products are less harmful and give rise to changes in consumption. Smoking behaviour and addiction, and not only the content ofcertain substances contained in the product before consumption, also determine the level of inhaled substances. This fact is not reflected in the use of such terms and so may undermine the labelling reauirements set i.n this Directive. " 62 Sweden and Norway are excepted from this provision. u' Cotvtlz0os) 330 final, pp. 5-6. THE ATTORNEY GENERAL (CIVIL AFFAIRS) Written Observations in Case E-16/10 Page23 of67

"ln generol the tobacco advertising ond sponsorship bons in Member States are wider thon ond/or go beyond the bons loid down in the Directive ond opply also to activities at locol level, such os odvertising in cinemos or at points of sole, sponsorship of all events ond free distribution. This is in line with the Council Recommendotion on the prevention of smoking ond on initiatives to improve tobacco control. This Recommendation invites Member States to prohibit, in accordonce with notional constitutionol principles, any forms of odvertising, sponsorship or proctices directly or indirectly addressed to promote tobacco products."6a

99. As held by the Commission in the quoted passages, EU policy on the prevention of tobacco smoking is expressed inter olia by the Council in its Recommendation 2OB/Sa/EC of 2 December 2OO2.6s This recommendation illustrates the approach of the EU Member States and EU legislator, calling for stricter national policies to supplement the minimum regulation on EU level.uu

100. On the severe effects of tobacco smoking, the Council states in Recital 7 of the Recommendation:

"(7) Smoking prevention ond tobocco control are olready priority objectives in the public heolth policies of Member Stotes and the European Community. Nevertheless, smoking remoins the biggest form of preventable deoth in the Europeon Union, and progress in reducing tobocco consumption ond smoking incidence is still disoppointing."

101. Particular attention is given to the harmful effects of all forms of advertising of tobacco products. The Council acknowledges, not surprisingly, the consensus, position among independent researchers on the effects of tobacco advertising and the need for comprehensive prohibitions in order to achieve an effect both in the short and longer term. The Council also embraces the work made by the World Health Organisation, a work in which the European Union has actively taken part.6t Reference is made inter olio to Recitals 7 and 17 of Recommendation 2003 /54 / EC:

"(7) (...) Moreover, the advertising, morketing, and promotion strategies used by the tobocco industry foster tobacco consumption, thereby increasing the alreody high mortolity and morbidity caused by the use of tobocco products. Some of these strotegies appeor to be torgeting young people in their educotionol yeors, in order to reploce the large number of smokers who die onnuolly. (...) (17) The World Health Orgonisation and the World Bank recommend that countries prohibit oll forms of tobocco odvertising ond promotion. ln cases where only certoin forms of direct tobocco advertising are prohibited, the tobocco industry frequently shifts its advertising expenditure to other marketing, sponsorship and promotion strategies, using creotive ond indirect woys to promote tobocco products, especiolly with young people. ln

6o See also COM(2007) 27 final, Green Paper Towards a Europefreeform tobacco smoke: poticy options at EU level, at p. 3 where the Commission "welcomes the excellent examples" by states having extensive policies a_gainst the harmful effects of passive smoking and "encourages all Member States" to follow these examples. o' Council Recommendation2003/54lEC, cited above and enclosed as Annex No 4. 66 lt should be recalled, however, that subsequent research has strengthened the basis for stricter approaches against the tobacco industry as exemplified by later legislation (cited above) and possible futlre amendments (section 4.2.2below). " See COM(2008) 330 final at p. 5 and section 4.4 below. TiIE ATTORNEY GENERAL (CIVIL AFFAIRS) Written Observations in Case E-16/10 Page 24 of 67

this woy, the effect of partial advertising bons on tobocco consumption may be limited. Moreover, the World Bank hos concluded that odvertising increoses cigorette consumption ond thot legislotion banning odvertising would reduce consumption provided that it is comprehensive, covering all media and uses of brand nomes ond logos. Such o reduction in cigorette consumption would hove immediate short-term ond long-term benefits for public health."

102. Hence, in order to be efficient - and not circumvented by the creative tobacco industry - there should be a comprehensive ban against advertising in all media and against all use of brand names and logos, see further in sections 4.4,6.4 and 6.5 below.

103. The Council encourages allstates to ban all forms of direct and indirect advertising as this is a key means to prevent smoking, in particular among young people. Recommended measures are regulations "to prevent tobacco sales to children and adolescents", including removing tobacco products from self-service displays in retail outlets and restricting access to tobacco vending machines.68 Moreover, by recommendation no 2 all states are encouraged to

"odopt appropriote legislative ond/or administrative meosures to prohibit, in accordance with notionol constitutions or constitutional principles, the following forms of advertising ond promotion: (o) the use of tobacco brond names on non-tobacco products or services, (b) the use of promotionol items (oshtroys, Iighters, parosols, etc.) ond tobacco somples, (c) the use ond communicotion of soles promotion, such os o discount, o free gift, o premium or on opportunity to participate in a promotional contest or gomel (d) the use of billboards, posters ond other indoor or outdoor odvertising techniques (such os advertising on tobocco vending mochines), (e) the use of odvertising in cinemas, ond (f) ony other forms of odvertising, sponsorship or proctices directly or indirectly oddressed to promote tobacco products"

104. The recommendation hereby includes several concrete advertising strategies, including advertising in the retail outlets, as well as "any other forms of advertising, sponsorship or practices directly or indirectly addressed to promote tobacco products" (letter (f)). This should, as the Government sees it, be read as the Council's recommendation to prohibit inter alio Ihe advertising caused by the visibility of tobacco products in the retail outlets.

105. Finally on this point, it is illustrative that the EU Member States have quite different regulations of tobacco sales in addition to the EU minimum requirements. An overview is provided in the RAND report.6e This overview should suffice to illustrate the variety of means adopted, the difference in the level of protection chosen and hence also the general opinion that it is for each state to set a higher standard and to choose the relevant instrument in order to further strengthen public health. The overview in Table 11.1. of the report shows that all states have age limits between 16 and 18 years and are banning single or unpacked cigarettes, around half of the states (partly somewhat more, partly somewhat fewer) have banned each of the following sales instruments; self service vending machines, mail order and Internet sales, sales in packages with less than 19 cigarettes; and point of sale advertising. Some states ut Recommendation no lb) and lc). 6e RAND (2010) p. r88. l

THE ATTORNEY GENERAL (CIVIL AFFAIRS) Written Observations in Case E-16/10 Page 25 of 67

have introduced bans on all or most of these aspects, whereas others may have introduced a few of them only. Most states that have not banned the different sales-enhancing instruments have introduced regulations restricting the free use of the instruments in question,

4.2.2 Further tightening the odvertising regulotion?

106. The European Commission has recently initiated a broad consultation on the revision of the Tobacco Product Directive 200L137 /EC.to The consultation addresses ,several potential shortcomings of the present EU legislation. Regarding a display ban, it is referred to some of the EU states having introduced such bans in section 6 of the paper. The consultation paper indicates three options in section 6.2:

"Option 7 - No chonge Member Stotes remain competent to have notionol medsures on limiting the access to tobocco products.

Option 2 - Controlled supply and occess (...) Tobacco disploy and promotion at points of soles would be restricted (e.9, allowing visibility for one pockoge per brond).

Option 3 - Ban (...) Promotions and displays in retoil stores would be banned in oll Member Stotes." t07 . This indicates that the Member States as the law stands today are themselves competent to decide whether to adopt a display ban ("Option 1 - No change"). Moreover, the fact that one of the suggestions is to adopt a general display ban on allvisible tobacco products that binding on all Member States ("Option 3 - ban") substantiates the basis for such a ban at national level.

108. Other issues on which comments are requested are related to inter olio the content of tobacco products and labelling, including the possibility of so called plain or generic packaging, i.e. that all tobacco packages are designed in the same manner, for instance that all cigarette packages are white only with textual and pictorial warnings, without trademarks or logos etc.

109. The Commission has, as part of this consultation, provided an extensive report from RAND Europe, assessing the impacts of possible amendments to the Tobacco Product Directive.Tl This report analyses a possible display ban and its effects in section 1.I.2to which the Government returns in more detail in section 6.4.4 below. The report concludes that a display ban would be among the most recommended amendments as it will reduce smoking for youths in particular, but also for adults.72

to European Commission, DG SANCO 2010, Possible revision of the Tobacco Product Directive 2001/37/EC, enclosed as Annex No 7, available here: http://ec.europa.eu/health/tobacco/docs/tobacco-consultation-en.pdf. t' RAND (2010) pp. 195, 202 and 2035, cited in section 2.2 above and enclosed as Annex No x. 72 As further set out below, this statement relates to all promotion at points-of-sale (PoS), both traditional promotions (posters etc.) and the display of products. However, a display ban is recommended above a ban on traditional PoS-advertising, see RAND (2010) e.g. p.235. THE ATTORNEY GENERAL (CrVrL AFFATRS) Written Observations in Case E-16/10 Page 26 of 67

4.3 EU and EEA States with a display ban

4.3.1 lceland

110. lceland was, as far as the Norwegian Government is aware of, the first state in the world to introduce a prohibition against the visible display of tobacco products, The display ban was laid down in The Tobacco Control Act No 95/2OOI and entered into force in August 2001. lt has later been amended with regard to specialist tobacco shops, and the key provision in the Tobacco Control Act Article 7, last paragraph, now reads:tt

"Tobocco and tobacco trodemarks sholl be so placed dt points of sale thot they ore not visible to the customer. Speciolist tobocco shops, e.g. shops which primorily offer tobocco ond smokers' supplies, moy, however, place tobocco and tobacco trademarks in such o woy inside the shop thot they are visible to customers when they hove entered the shop."

Ltt. The principle rule is hence that the visibility of all kinds of trademarks at the points of sales is prohibited. The display ban forms an integrated part of the general prohibition of all advertising of tobacco, regulated in Article 7 of the Tobacco Control Act.

L12. The lcelandic Ministry of Health has informed the Norwegian Ministry of Health that tobacco products are primarily placed in drawers and to some extent concealed under the counter. Moreover, written information about the tobacco products in the retail outlets is forbidden. This prohibition also includes price lists without any pictures or trademarks,

113. The derogation for specialist tobacco shops was introduced after a Supreme Court decision in 2006. Several tobacco companies unsuccessfully challenged the general legality of the display ban. However, the Supreme Court found that the display ban should not include specialist tobacco shops. As far as the Norwegian Government understands, this decision was based on the lcelandic Constitution and not on EEA law.

4.3.2 lrelond

LL4. lreland originally introduced a display ban in the Public Health (Tobacco) Act in 2002. The display ban did not, however, enter into force before 1 July 2009 after amendments in 2004 and 2009. The delay was due to fierce opposition by the tobacco industry. The lrish Health Authorities were sued by several tobacco companies in 2OO4, but the action was withdrawn by the industry shortly before a hearing in the case was to take place in February 2007. Moreover, Philip Morris initiated new legal proceedings in October 2009. The Government is not aware of any further steps in these latter proceedings.

115. The principal rule is set out in Section a3(3) of the Public Health (Tobacco) Act as amended in 2004, requiring the tobacco products to be kept in a "closed container or dispenser" that neither is visible nor accessible to the customers. The paragraph reads:7o

"(3) A person registered under section 37 (other thon o person to whom regulations under subsection (2) opply) shall ensure that tobacco products sold by him or her are kept in o closed contoiner or dispenser thot is not visible or accessible ta ony person other than the

" The Act in English is available here: http://eng.heilbrigdisraduneyti.is/laws-and-regulations/laws/nr/2484. to The Public Health (Tobacco) (Amendment) Act 2004 is available here: http://www.irishstatutebook.ie/2004/enlactlpub/0006/index.html. See amendment no 14. THE ATTORNEY GENERAL (CIVIL AFFAIRS) Written Observations in Case E-16/10 Page27 ol67

first-mentioned person, or a person employed by him or her in connection with the business of selling goods by retoil while so employed."

1,1,6. The display ban forms part of the general ban of tobacco advertising, see, in particular, section 33A of the Public Health (Tobacco) Act as amended in2OO4, defining the visibility of products as "advertisement".Ts By an amendment of this act in 2009, an exception was introduced for specialist tobacco shops.Tu

1,17. Under certain conditions, customers over l-B years may on request see one package of each product or a list with pictures, see Public Heath (Tobacco) (Product Information) Regulations 2oog.11

4.3.3 The United Kinodom

118. The United Kingdom introduced a display ban by adopting Health Act Section 2l- in November 2009, thereby amending The Tobacco Advertising and Promotion Act 2002 (TAPA). The display ban is regarded as part of the ban of advertising. The ban enters into force for larger retail stores in October 2011 and for other retailers in October 2013. The Health Act Section 21 provides for the display ban in England, Wales and Northern lreland. By a decision in the Scottish Parliament in January 201-0, a similar display ban will enter into force in Scotland in 2011.

119. The Principal rule is laid down in TAPA Section 74:78

"7A Prohibition of tobocco disploys (1") A person who in the course of o business disploys tobacco products, or couses tobocco products to be displayed, in a place in England ond Wales or Northern lreland is guilty of on offence."

L2O. Under certain conditions, customers over l-8 years may on a concrete request see the tobacco products, cf. Section 78(2lr. There are detailed and strict regulations concerning price lists with neutral information and the possibility for customers on request to see a list of products including pictures. Under no circumstances may products or pictures of products be visible to the customer having requested this for a longer period than strictly necessary."

Izt. An exception is provided for displaying tobacco products in specialist tobacco shops. The display may, however, not be visible from the outside of such premises.so

I22. Even in England, there are pending legal proceedings. The Norwegian Government is aware of four cases where the tobacco industry is challenging the display legislation. One of the cases is brought by the Plaintiff to the present proceedings, Philip Morris. The industry submits that

75 See http://www.irishstatutebook.iel2004/en/actlpub/0006/index.hhnl, amendment no 5. '" See http://www.oireachtas.ie/documents/bills28/acts/2009/a2309.pdf, section 7. " See http://www.otc.ielUploads/Public%20Health%20(Tobacco)%20(lrodLrct%20lnformation) %2 0Regu lations%202009.pd f. 78 The amendment to TAPA by the 2009 Health Act Section 2l is available here: http://www. leqislation. gov.uldukp ga/2009/2 I /contents. t'E.g. The Tobacco Advertising and Promotion (Display of Prices) (England) Regulations 2010, see http;//www.opsi.gov . to The Tobacco Advertising and Promotion (Specialist Tobacconists) (England) Regulations 2010, see http://www.opsi.gov.uk/si/si2010/uksi 20100446 en l. T,HE ATTORNEY cENERAL (ClVtL AFFATRS) Written Observations in Case E-16/'10 Page 28 of67

the display ban is contrary to EU law. A hearing in the cases is scheduled for 11, - 15 April 2011. The Government is not aware of any referral to the European Court of Justice in either of these cases.

4.3.4 Finlond

123. The Finnish display ban was introduced by amendments in the Tobacco Control Act No 693/1-976 in August 2010. The display ban enters into force 1 January 2012. The principal rule is laid down in Section 8a, first paragraph, whereas an exception for specialist tobacco shops is laid down in the second paragraph:81

"Disploy of tobacco products ond their trodemorks in retoil sole facilities for tobocco products is forbidden.

What is provided in poragraph J. does not opply to o soles point moinly selling tobacco products and smoking accessories thot is provided with o separote entronce ond whose tobacco products connot be seen by the public from outside the sales point."

1'24. On a concrete request, customers may be shown a printed catalogue or printed list with tobacco products, see Section 8a, fourth paragraph. The exception of a catalogue containing also pictures of the tobacco products was introduced by the Parliament based on the "laws on freedom of expression" under the Finnish Constitution.82 Further provisions on the content and layout of the catalogue and list are laid down by decree of the Ministiy of Social Affairs and Health (131.1,/2070).83 The National Supervisory Authority for Welfare and Health is currently working on further guidance on how the display ban may be implemented.

4.3,5 Other stotes

I25. The Plaintiff has, during the procedure so far, been focusing on the fact that other states, notably Sweden and Denmark, have not introduced similar display ban. The Government fails, however, to see that this forms a relevant objection to the legality of the display ban.

126. First, as EU law presently stands, it must be for each EU state to determine whether to introduce a display ban or not, see inter olia section 4.2 above and section 6.1 below.

L27. Second, the Government is not aware of any study or report by the authorities discussing whether to introduce a display ban in Sweden or Denmark. There may be individual politicians or interest groups that have questioned the need for a display ban. This cannot, however, have any bearing on the legality of the display ban. lt is also worth noting that Sweden is in a particular situation as it is the key producer of the oral tobacco snus, a position that may influence certain parties' statements related to the display of tobacco products.

I28. lt is notable that the Swedish Folkhdlsoinstitutet (The Public Health Institute) has recommended considering a display ban also in Sweden.8o

8' See http://www.fi nlex.fi/sv/laki/ajantasa/1 976ll 9760693. 82 See http://www.eduskunta.fi/faktatmp/utatmp/akxtmp/gruu_21 2010_p.shtml. 83 See http :/lwww. fi n I ex.fi /sv/laki/kokoe lma/20 t 0/20 I 00 I 80.pdf. "* See http://www.thi.se/Documents/Om-oss/remisser/2009/Yttrande-olovlig-tobaksforsaljning-090527.pdf, at pp. 6-'1. T{rE ATTORNEY GENERAL (CtvtL AFFATRS) Written Observations in Case E-16/10 Page 29 of 67

4.3.6 Comparison

129. This short overview of the display ban legislations in lceland, lreland, United Kingdom and Finland shows that the key features are exactly the same as in the Norwegian legislation. The essence is to keep the tobacco products out of sights of customers. The visible display of tobacco products is in allstates regarded as a form of advertisement. Hence, the display ban is a naturaland integrated part of the advertisement ban in the states concernbd. And indeed, all five states are basing their legislation on existing research demonstrating that the display ban is well substantiated. lt is also notable that all five states under certain conditions exempt specialist tobacco shops from the display ban. This exemption is in the Government's opinion legitimate, but not necessary in order to comply with EU and EEA law.

130. On the detailed level there are some differences between the respective states' legislation regarding, notably, what kind of information that may be given to the customer in the retail outlets.'u lt must be stressed that such differences do not at all question the legality of either of the systems under EU or EEA law. lt must clearly fall within the discretion of each state to set the more detailed criteria for the display ban, see section 6.1 below on the states' discretion and choice of level of protection.

4.4 WHO policy on advertising and display bans

131. The World Health Organization (WHO) plays a vital role in the world's effort to reduce the public health harms caused by tobacco use. The WHO Framework Convention on Tobacco Control from 2003 forms a cornerstone in this work (WHO FCTC, hereinafter often "the Framework Convention"). The Framework Convention came into force in 2005 after the ratification by 40 States. As of January 20L1 there are 172 parties to the Framework Convention, including the EFTA States Norway and lceland, the European Union as suchtu and 26 out of 27 EU Member States.87 The Framework Convention is available on the WHO websitess, and it is also annexed to these written observations.ss

I32. The key obligation is to implement "a comprehensive ban of all tobacco advertising", see Article 13 No 2:

"2. Each Party shall, in accordonce with its constitution or constitutionol principles, undertake o comprehensive bon of all tobacco advertising, promotion ond sponsorship."

133. The parties are in the same provision given a five year period from the entering into force of the Convention (i.e. from 2005) to implement this obligation. "Advertising" is defined widely in Article 1 c) of the Convention:

"(c) "tobocco odvertising ond promotion" meons any form of commercial communicotion, recommendotion or oction with the oim, effect or likely effect of promoting o tobocco product or tobacco use either directly or indirectly"

85 E.g. that customers in the three EU states may, on a concrete request, see lists or catalogues with pictures, whereas this is not possible in lceland and Norway. oo See CouncilDecision 20041513/EC of 2 June 2004,OJ2004L213,p.8. st List of FCTC parties: http://www.who.int/fctc/signatories-parties/enTjndex.html. See also RAND (2010) p. l. 88 lrttp :/lwww. wtro. intltobaico/framework/WHO-FCtc-en giish.pcli 8e Annex No 8. THE ATTORNEY GENERAL (CtVtL AFFATRS) Written Observations in Case E-16/10 Page 30 of67

134. As is evident from this definition, ony form of commercial communication with the "aim, effort or likely effect" of promoting tobacco products or tobacco use falls under the scope of the advertising regulation in the Convention, whether the aim or effect is direct or indirect. This includes, as will be further demonstrated below, the visible display of tobacco products. Hence, the display of products also falls under the scope of the obligation of a "comprehensive ban on all tobacco advertising, promotion and sponsorship" in Article 13 No 2.

135. The only exception from this principal rule concerns parties that are not in a position to undertake a comprehensive ban due to its constitution or constitutional principles, cf. Article 13 No 3, Instead, these states are obliged to undertake specific minimum requirements set out in No 4, prohibiting many forms of advertising. They are also encouraged to introduce measures beyond these minimum obligations, cf. Article 13 No 5.

136. The wide definition of odvertising ond promotion under the Convention is further clarified in the Guidelines for implementation of Article 13 where the display of tobacco products is held as one out of several advertising methods that fall under the Convention.e0

137. The Guidelines were adopted after a comprehensive procedure following a decision by the Convention in 2OO7 to establish a working group to suggest draft guidelines on the implementation of Article 13. The working group consisted of several parties, including the Convention Secretariat, expert groups and certain parties - including the European Union - with a particular role as "key facilitators",el The draft guidelines were sent for comments to all parties, discussed in plenary sessions and finally adopted by consensus among the parties to the Framework Convention in November 2008.e2

138. Some of the adopted guidelines to the Framework Convention are of a non-binding nature, whereas others represent the parties own understanding of the obligations under the Convention. The Article 13-guidelines are of the latter category which follows from the wording of the Guidelines themselves. This is also indicated in the Preamble, stating that the Guidelines are adopted to assist the Parties "in meeting their obligations under Article 13" and to provide guidance "for implementation of this Article".

139. The Guidelines start by emphasizing that it is "well documented" that tobacco advertising increases tobacco use and that comprehensive bans on advertising decrease tobacco use (point 3(a)). An effective advertising ban must be"comprehensive and applicable to o//tobacco advertising, promotion and sponsorship" (point 3 (b), emphasis in original text). Thereafter, the wide definition of tobacco advertising in the Framework Convention Article 1is cited (point 3(c)) with further comments as to the scope of a "comprehensive ban" of all such advertising. t4O. In that regard, the parties to the Convention have expressed their consensus views on the effects of different types of advertising regulations in points 5 and 6 (emphasis added):

e0 Decided on the third session of the Conference of the parties to the WHO Framework Convention on Tobacco Control, Durban 2008, see http://apps.who.int/gb/fu pp. 30-47also enclosed as Annex No 9 to these observations. er See also COM(2008) 330 final p. 5 on the active role played by the European Union. e2 For the procedure in this particular case, see the decision establishing the mandate for draft guidelines, second session of the Conference of the parties to the WHO Framework Convention on Tobacco Control, Bankok 2007, http:i/apps.who.inVgb/fctc/PDF/cop2lCOP2_07_CDDecisions-en.r:df pp. l4-15. For the voting procedures, see the Rules of Procedure Article 50, http://whqlibdoc.who.inVpublications/2006/9789241594554_ens.pdf. I FIE ATTORNEY GENERAL (CIVIL AFFAIRS) Written Observations in Case E-16/10 Page 31 of67

"5. A ban on tobacco odvertisina, promotion ond sponsorship is effective onlv if it hos o brood scope. Contemporory marketing communication involves an integrated approach to odvertising ond promoting the purchose and sole of goods, including direct morketing, public relotions, soles promotion, personal selling ond online interactive morketing methods. lf onlv certoin forms of direct tobocco odvertisina ore prohibited. the tobacco industrv inevitablv shifts its expenditure to other odvertisina. promotion and sponsorship strategies, using creative, indirect ways to promote tobocco products ond tobacco use, especially among young people.

6. Therefore, the effect of o partial advertisinq bon on tobocco consumption is limited. This is recognized in Article 13 of the Convention, which loys down the bosic obligation to ban tobocco odvertising, promotion ond sponsorship. According to Article 13.7 of the Convention, "Porties recognize that o comprehensive bon on odvertising, promotion and sponsorship would ieduce the consumption of tobocco products"."

1"41. Thus, an advertising ban must have a broad scope to be effective. A partial ban on advertising "inevitably" leads to a shift in the industry's marketing strategies in order to promote their products. This forms the background for the wide definition of "advertising" in Article 1(c) of the Convention (Guidelines point 7). These elements are discussed in more detail in section 6.4 below. t42. tt is thereafter in point 8 of the Guidelines further clarified what measures constitute tobacco advertising. lt covers "at least ... various sales and/or distribution arrangements", exemplified by precisely "display at points of sale".tt Moreover, the "display of tobacco products at points of sale" is included in the non-exhaustive list of measures in the appendix which according to ooint LL "fall under the ban in Article 13 of the Convention".

I4g. In the following points the Guidelines relate to retail sale and display of tobacco products specifica lly, stating:

"Retail sale and display 72. Disploy of tobacco products ot points of sale in itself constitutes odvertising ond promotion. Disploy of products is a key meons of promoting tobocco products and tobocco use, including by stimuloting impulse purchases of tobacco products, giving the impression thot tobocco use is socially acceptoble ond making it harder for tobacco users to quit. Young people ore porticularly vulnerable to the promotional effects of product display.

L3. To ensure thot points of sole of tobacco products do not have any promotional elements, Pqrties shoutd introduce a totol ban on any disploy and on the visibility of tobocco products ot points of sale, inctuding fixed retait outlets and street vendors. Only the textual listing of products ond their prices, without any promotional elements, would be allowed. As for oll ospects of Article 1j of the Convention, the ban should also apply in ferries, oirplanes, ports ond airports."

144. Hence, the display of tobacco products should be banned as it is "a key means of promoting tobacco products and tobacco use"" lt stimulates impulse purchase and makes it harder to quit smoking, Both the particular effect on young people and the impression of social acceptability

n3 Footnote I of point 8 in the Guidelines. T,HE ATTORNEY GENERAL (ClVtL AFFATRS) Written Observations in Case E-16/10 Page 32 of67

is emphasized. All these aspects are important to - and in line with - the Norwegian policy on display bans.to

145. All these factors demonstrate that the display of tobacco products falls under the scope of the obligation to implement a "comprehensive ban" unless this is impossible due to constitutional principles.'s lt is recognized by the parties to the Convention that a comprehensive ban will not necessarily mean an absolute ban. The parties will therefore have elements of discretion in allowing some limited forms of advertising. lt is emphasized by the parties that only "some very limited forms of relevant commercial communication, recommendation or action might continue to exist after a comprehensive ban has been implemented"t6. This could indicate, for instance, that the parties are obliged by the Framework Convention to implement some kind of ban on the display of tobacco products, whereas it falls within their discretion to implement the more detailed regulations.

146. lt is, however, in the Government's opinion not necessary to determine in the present case whether the obligation to implement a comprehensive advertising ban requires a display ban in all Convention parties that do not have relevant constitutional restraints. This question also falls outside the mandate of the EFTA Court. The relevance to the present case of the WHO Convention is that it constitutes important factual and legal arguments in favour of introducing display bans. The Convention underscores that EU and EEA law cannot be interpreted to the effect that the states are prohibited from introducing a display ban in order to reduce tobacco sales. These aspects are further elaborated on in section 6 below.

4.5 States outside the EEA with a display ban

147. Also states outside the EEA have introduced display bans or are considering passing relevant legislation. The two states going that lead the way by example are Canada and Australia.

148. All the 10 provinces and three territories of Canada have introduced display bans. The more detailed regulation differs. For instance, whereas seven provinces have a general ban of all visible tobacco products, three provinces have limited the ban to outlets where young people (typically minors under 18 or 19 years old) are permitted or may see the tobacco products.

149. In Australia, several states and territories have adopted legislation on display bans (The Australian Capital Territory, New South Wales, Victoria, Western Australia and Tasmania). Some of the bans have entered into force in 2010, others will take effect from a date within the period 2Ot1,-2013.

ea It is also recommended to ban self-service vending machines because they constitute by their presence a means of advertising under the Convention (Guidelines point l4). The types of vending machines defined as advertising under the Convention are those self-service automates prohibited in Norway under Section 8 of the Tobacco Control Act. n' It might therefore seem somewhat imprecise when Oslo tingrett states in section 3 of the reference that it is not determined in law whether a display ban falls under the obligation to have a comprehensive ban on advertising under Article l3 No 2 of the Framework Convention. nu Guidelines point 37. rHE ATTORNEY cENERAL (CtVtL AFFATRS) Written Observations in Case E-16/10 Page 33 of 67

QUESTTON NO I

5.1 Introduction

150. The first question from Oslo tingrett reads:

1, Sholl Article 17 of the EEA Agreement be understood to meqn thot o general prohibition against the visible disploy of tobacco products constitutes a meosure hoving equivalent effect to o quontitative restriction on the free movement of goods?

151. The essence of a display ban is that tobacco products shall not be visible in the retail outlets. The objective is to limit the advertising effect caused by the visibility of cigarette packages and other tobacco related products - with their colours, trademarks etc. - typically placed on large stands by the counter in the outlets (so called "power walls"). For a more detailed assessment, see section 3 above, in particular.

1'52. A display ban, as the one provided for under the Norwegian legislation, does not relate to the tobacco products as such or to the design of the packages etc. Hence, it falls outside the scope of the Cossis de Diion case law related to product requirements.eT Rather, the display ban is addressing one specific form of advertising; that caused by the mere presence of the tobacco products. The case must therefore be assessed under the specific case,law on "national provisions restricting or prohibiting certain selling arrangements". As held in Joined Cases C- 267 /91and C-268/91 Keck and Mithouard, paragraph 16:"

"76 By controst, controry to whot hos previously been decided, the opptication to products from other Member Stotes of national provisions restricting or prohibiting certoin setling orrongements is not such os to hinder directly or indirectly, actuolly or potentiolly, trade between Member States within the meoning of the Dassonvitle judgment (Cose 8/74 [J.974] ECR 837), so long as those provisions opply to all relevant troders operoting within the nationol territory ond so long as they offect in the same monner, in law ond in foct, the marketing of domestic products ond of those from other Member stotes."

153. This fundamental case and the test set out in paragraph 16 thereof, has been adopted by the EFTA Court on several occasionstt, and it has been cited continuously by the ECJ ever since.too The essence is that national selling arrangements that neither directly nor indirectly discriminate between the marketing of domestic products and products from other EEA States do not constitute measures having equivalent effect to quantitative restrictions on the free movement of goods under Article 11 EEA (Article 34 TFEU).

156. lt is undisputed that the display ban in question applies to all relevant trading operations in Norway. lt applies to all traders, irrespective of their nationality, to all sales channels but

nt Car. 120178 Rewe-Zentrat ('Cassis de Dijon') 649. e8 [lgig]ECR Joined Cases C-267191 and 268191 Keck and Mithouird ECR I-6907. nn [1993] Case E-5196 Ullensaker kommune and Nitle REC 1997 p. 30, p*as. 23-27; CaseE-6196 LV'ilhelmsen and Oslo commune REC 1997 p. 53, para. 45; Case E-9/00 ESAv. Nor-way (rusbrus, alcopops) REC 2002 p.72,para.50; and to the same effect with references to ECJ case law Case E-4104 Pedicel REC 2005 p. 1, paras. 45-46. 'oo E.g. Case C-412193 Leclerc-Siplec l995lECR I-179, para2l; Joined Cases C-34l9 5, C-35/95 and,C-36195 Konsumentombudsmannen v. De Agostini and TV-Shop [997] ECR I-3843, para, 40; CaseE-322/01 DocMorris ECR I- 14887, para, [2003] Case C- I l0/05 Commission v. Italy [2009] ECR I-5 1 9, para. 36; and Case C- I 08/09 Ker-Optika,2 December 2010, not yet reported, paras. 5l-52. THE ATTORNEY GENERAL (CtVtL AFFATRS) Writien Observations in Case E-16/10 Page 34 of67

specialist tobacco stores, and to all tobacco products irrespective of their origin. This is also emphasised by Oslo tingrett in section 1 of the request for an advisory opinion.

157. The relevant test is thus whether the legislation "offect[s] in the same manner, in law ond in foct, the marketing of domestic products ond of those from other" EEA States. As there is no discriminatory element in low, the question is whether the display ban in fact favours domestic products. The Government contests that the display ban implies such discrimination, see section 5.2 below.

158. ln Keck, the ECJ continues by referring to the consequences of a finding that the national legislation on certain selling arrangements is non-discriminatory, see paragraph 17:

"L7 Provided that those conditions ore fulfilled, the opplicotion of such rules to the sole of products from another Member State meeting the requirements laid down by thot State is not by noture such os to prevent their access to the market or to impede occess any more thon it impedes the occess of domestic products. Such rules therefore foll outside the scope of Article 30 of the Treoty."

159. In some cases this paragraph has been interpreted to the effect that a selling arrangement that prevents any access to the market of the relevant products constitutes a restriction even if non-discriminatory. The Government submits that this is a very limited exception from the rule that only discriminatory selling arrangements fall under the scope of Article 11 EEA. This is further set out in section 5.3 below where it is also demonstrated that the display ban does not imply such a prevention of market access.

160. The Plaintiff argues that the correct test is a market hindrance test that the Plaintiff sees as much wider than the test of discrimination and prevention that has thus far been the decisive tests under Article 11 EEA as regards selling arrangements. The Government contests that such a wider test is applicable in cases concerning selling arrangements. In any event, there would in the present case not be a hindrance of market access as this notion has been clarified by the ECJ in other types of cases, requiring that the possibility of using the products has been at least greotty restricted.tot This is further set out in section 5.4 below.

161.. The Plaintiff seems to rely on three recent cases from the ECJ striking down minimum tobacco prices.tot The Government fails, however, to see the relevance of these cases. The three cases concern a concrete interpretation of a specific directive (Directive 95/59/ECl on excise duties, and in none of the cases was it even alleged that there was a restriction underArticle 28 EC.103 Apart from the fact that the said directive falls outside the scope of the EEA Agreement as it concerns tax harmonisation, it must be noted that the directive and previous case law allow extensive excise duties as well as a prohibition against sale at loss as means to reduce tobacco use.too What the ECJ did not accept was a high and general minimum price that de facto excluded all price competition as this would be directly contrary to the directive.los Such an interpretation of a non-applicable directive concerning quite a different part of the tobacco policy, without any reference to the case law on selling arrangements, cannot have any bearing on the application of the Keck doctrine to display bans.

'o' Case C-142/05 Mickelsson and Roos [2009] ECR I-4273,para.28. 'o' Case C-19'/ /08 Commission v. Frqnce: Case C- 198/0 I Commission v. Austria: and Case C-221108 Commissionv. Ireland, all of 4 March 2010, not yet reported. t03 Commissionv. France,para.4g;Commissionv. Austria,para.3S; andCommissionv. Ireland,para.50. toa Commission v. Austria. oaras. 42-43. los Commissionv. France',para.47; Commissionv. Austria,para.33; and Commissionv. Ireland,para.45. 'FHE ATTORNEy GENERAL (CtvtL AFFATRS) Written Observations in Case E-16/10 Page 35 of67

1'62. Finally in these introductory remarks, it should be recalled that it is not for the EFTA Court under the advisory opinion procedure to assess the facts of the case or to assess whether national law is compatible with EEA law.106 This division of powers between the EFTA Court and the national courts must imply that it is, in principle, for the national court to conclude on whether the display ban constitutes a restriction under Article 11 EEA. lf, hbwever, the Court follows the legal line of reasoning of the Norwegian Government, there should be sufficient basis for a negative conclusion to question No 1. On the other hand; if the Court does not follow this approach, the decisive criteria will be of a factual nature on which there has been limited submission of evidence before the EFTA Court. Accordingly, the Court should under that alternative confine itself to providing guidance on the relevant arguments and criteria.

5.2 There is no discrimination

163. The decisive test is thus, with the caveat for selling arrangements preventing market access, whether there is some form of indirect discriminotion. This test has been set out in the same manner by the EFTA Court and the ECJ ever since Keck.lot Case law therefore unequivocally requires that a discriminatory element must be established. Without such a discriminatory element in law or in fact the selling arrangement does not constitute a measures having equivalent effect to a quantitative restriction on the free movement of goods under Article 11 EEA.

164. Provided that the national measure constitutes a selling arrangement, there is a presumption that the measure falls outside the scope of Article l-1 EEA, i.e. that there is no restriction under this provision. lt is for the party claiming that the national measure is contrary to EEA law to demonstrate that there is a restriction under Article 11 EEA. Hence, the party must show that there are indeed discriminatory elements inherent in the display ban. This is held e.g. by the Grand Chamber in De Agostini ond TV Shop, paragraph 44:108

"Consequently, on outright bon on advertising aimed at children less than 72 yeors of age and of misleoding odvertising, os provided for by the Swedish legislotion, is not covered by Article 30 of the Treoty, unless it is shown thot the bon does not offect in the some woy, in fact ond in low, the morketing of nationol products ond of products from other Member States."

165. The advertising ban in that case would hence fall outside the scope of Article 30 EC (now Article 34 TFEU) unless it was shown that the ban would affect the marketing of national products favourably compared with the marketing of products from other Mbmber States.

L66. Indeed, in many cases the ECJ leaves this assessment to the national court, in line with the general principles for division of competence between the Community courts and national courts.loe In some cases the Courts have nevertheless had the factual basis to draw the conclusion that there are indeed no discriminatory elements present. For example, the ECJ held in Case C-71/02 Korner, a case concerning certain advertising requirements:tto

'ouE.g.CaseE-l/10 Periscopus,l0December20l0,notyetreported,para.2S;Case42ll0lTraunfellner[2003] ECR I- l 1941, paras. 2l-24; and Joined Cases C-428 - 434106 Uni6n General de Trabqiadores de la Rioia [2008] ECR l-6747, para.77. '"' Relevant cases cited in section 5.1 above, others are set out below. t08De Agostini and TV-Shop, para. 44. 'on E.g. Case C-20103 Burmanjer [2005] ECR l-4133, paras. 31-32; and Case C-441104 A-punkt Schmuckhandels [2006] ECR I-2093, para. 25. ''" Case C-7ll02 Karner 12004) ECR I-3025, para. 42. See also e.g. Nille, para.27 . TILIE ATTORNEY GENEML (CIVIL AFFAIRS) Written Observations in Case E-16/10 Page 36 of 67

" (...) Although such o prohibition is, in principle, tikety to timit the total volume of sales in thot Member Stote and, consequently, also to reduce the volume of sales of goods from other Member Stotes, it nevertheless does not affect the marketing of products originoting from other Member States more thon it offects the marketing of products from the Member State in question. ln ony event, there is no evidence in the file forwarded to' the Court by the national court to permit o finding that the prohibition has had such an effect."

1'67. The Government cannot see that it has in the present case been shown that there are any discriminatory elements inherent in a display ban as the one found in Norway.

168. Case law concerning other types of regulations indicates that discriminatory elements would more easily be found in two types of cases. These cases differ significantly, however, from the display ban regulation.

169. First, discriminatory elements have been detected in cases where the restrictive selling arrangement applies to one out of several competing products only, inter olio to alcopops ('rusbrus'), mainly produced in other EEA States, and not to beer, mainly produced domestically.ttt Conversely, the display ban implies that all tobacco products are treated in the same manner, and there are no relevant competing products that are treated differently.

170. Second, discrimination has been found where the selling arrangement relates to one particular sales method that is more significant to imported products than to domestic ones. A ban only on Internet sales could have implied such factual effects.112 The display ban, however, applies to all sales channels in an equal manner.

171'. ln some other cases it has been held that particularly strict marketing regulations may, under certain condition, imply disadvantages to imported products, and it is on these cases that the Plaintiff primarily relies. The Government fails, however, to see that the conclusions in these cases could be transferred to the display ban as the one in Norway.

172. lt must be emphasized that the strictness of the selling arrangement - albeit being a relevant factor when assessing whether there is discrimination in fact - does not in itself bring the arrangement within the scope of Article 11 EEA. Discrimination will only occur if it is shown that the national measure will be to the benefit of domestic products.

1,73. The acceptance of even strict selling arrangements as non-discriminatory is clearly indicated in the continuously cited paragraph 76 of Keck. The Keck rule on discrimination encompasses "national provisions (...) prohibitine certain selling arrangements,, (emphasis added). This shows that even such strict prohibitions fall outside the scope of Article 11 EEA if non- discriminatory. Were prohibitions and comparably strict regulations to imply discrimination per se, this part of the Keck doctrine would appear quite meaningless.

174. The Government is not aware of any case indicating that even comprehensive prohibitions on advertising are automatically regarded as discriminatory. On the contrary, the scope of the measure is only a part of the assessment of whether there are concrete indications that the regulation at stake would be to the benefit of national products.

I75. ln De Agostini and TV Shop the ECJ held that a ban on advertising on television would not amount to a quantitative restriction unless it was demonstrated that the ban did not affect

' " Case E-9l00 ESA v. Norway, para. 5l . 1 t2 D o c Morr is, para. 7 4 ; and Kei- Op t ika, p aras. 5 4-S 5 . THE ATTORNEy cENERAL (CtvtL AFFAIRS) Written Observations in Case E-16/10 Page 37 of67

foreign and domestic products in the same manner. T'his was for the national court to determine. lt was also mentioned, however, that De Agostini claimed that television promotion was "the only effective form of promotion" for that company. Seen together with the preceding statement from the Court that it "cannot be excluded that an outright ban" on a type of promotion "might have a.greater impact on products from other Member States", this seems to indicate that competing national products had other advertising methods available that were not in fact available to De Agostini.il3

176. Gourmet concerned a ban on advertising for alcohol that for all practical purposes prohibited any form of advertising directed at consumers.tto lt was for the national court to "carry out a precise analysis of the facts characteristic of the Swedish situation".lls Nevertheless, it was stated that consumption of alcoholic beverages was "linked to traditional social practices and to local habits and customs". lt was on this basis that the Court continued that an absolute prohibition against all forms of advertising could be "liable to impede access to the market by products from other Member Stdtes more than it impedes access by domestic products, with which consumers are instantly more familiar."ttu The same is held by the EFTA Court in pedicel where it is added that the information presented concerning the Norwegian market for alcoholic beverages did not indicate that domestic and foreign products were affected in the same manner in law and in fact.117

177. Hence, it seems as if the general presumption set out in De Agostini that selling arrangements - even strict ones - are non-discriminatory may under certain conditions be turned around; namely provided that the market in question has particular characteristics - such as traditional practices and local customs - the effect of which is that customers would more easily choose "domestic products, with which consumers are instantly more familia/'. These conditions are, however, not present in the case at hand.

178. The Government is not aware of any practices or customs with regard to tobacco use that is comparable to the ones related to alcoholic beverages, In the latter markets, it can hardly be disputed that the choices of preferred beverages differ between the EEA States. This is probably at least in part due to longstanding traditions of local production of alcohol based on the varying conditions for such production in the different states. The Government would assume that even today there is extensive production in most of EEA States, and notably in Sweden and Norway addressed in Gourmet and Pedicel, and that this may still contribute to diverging preferences for alcoholic beverages. The tobacco market is different. As in most other comparable states, the market for cigarettes in Norway is characterized by the big international companies. Five companies are particularly dominant in an oligopoly (or 118 oligopoly-like) market, the Plaintiff being a subsidiary company of the world's biggest tobacco producer. These facts would presumably be one of the reasons why one cannot state that there are traditions and practices comparable to those related to alcoholic beverages.

179. Moreover, there is no tobacco production in Norway.ltt Hence, it is simply not possible that the display ban would favour domestic products, i.e. Norwegian products. Indeed, this undisputed fact demonstrates that there cannot be traditions and customs in Norway to the t,1,3^ De Agostini and TV-Shop, paras. 43-44. "" Case C-405198 Gourmet ECR I-1795, para.20. tts [2001] Para.21 . tr6 Para.2l. tl1 Para.46. t ' RAND (2010) p. xxi and pp. 55 et seq. "" See the reference for an advisory opinion section 2.1. THE ATTORNEY GENERAL (CIVIL AFFAIRS) Written Observations in Case E-16/10 Page 38 of67

effect that domestic products are in fact favoured. This fundamental premise in Gourmet and Pedicel therefore fails. As held in paragraph 2t of Gourmet, the "facts characteristic of the Swedish situation" are the decisive ones. The ECJ thereby recognized that as regards the significance of localtraditions and consumer habits, in particular, the outcome of the analyses may be different depending on the characteristics of the state involved. The same seems to be indicated in Pedicelby presupposing that the facts of the case might in principle have lead to a different conclusion in Norway than in Sweden.tto

180. On this background, the Plaintiff's argument that the state of law cannot depend on the factual situation in the state concerned, should not be followed. The principal rule must be the opposite one; that no discrimination can be established as long as there are no comparable domestic products. This is clearly set out by the ECJ in cases concerning discriminatory taxation under Article 90 EC (similar to Article L4 EEA), and the same must apply under the Keck doctrine. ln Danske Bilimport4rer'the ECJ held, with reference to its previous case law:t2t

"On the other hand, Article 90 EC cdnnot be invoked ogainst internol toxotion imposed on imported products where there is no similor or competing domestic production. ln porticular, it does not provide a basis for censuring the excessiveness of the level of taxation which the Member Stofes might adopt for particulor products, in the obsence of any discriminatory or protective effect (see Commission v Denmork, paragroph 70)."

181. The ECJ indeed mentioned the argument put forward by the Plaintiff in Commission v. Greece.t" Based on the previous.paragraphs this cannot, however, be decisive, particularly as both the ECJ and the EFTA Court have recognized that a different conclusion in different states could be the outcome of the test of discrimination in relation to consumer habits and traditions discussed here. lt should also be noted that the point made in Commission v. Greece was that lack of national production of processed milk for infants (mother's milk) could not in itself lead to the conclusion that the requirement of selling such milk in pharmacies would imply discrimination,l23 Applied to the present case, this means that the lack of Norwegian tobacco production cannot os such exclude that there are discriminatory elements. As the ECJ continued, discrimination could nevertheless be found "if it was apparent that the legislation at issue protected domestic products which were similar to processed milk for infants from other Member States or which were in competition with milk of that type."t'o There are no such similar, domestic products treated more favourably in the present case.

IB2. The Plaintiff seems to focus on the significance of trademarks in communicating with the customers and of so-called trademark-based competition, in particular for new products. The Government agrees with the Plaintiff that the tobacco products as such, with colours, trademarks etc., are important in communicating with the customers, i.e. to seek to increase sales. There is no indication, however, that a display ban will only or primarily lead to less intensive competition between brands and not to a lower total sale of tobacco products, see section 6.4.6 below. Moreover, these arguments cannot lead to the finding of discriminatory elements in the display ban. By focusing primarily on new products, apparently compared with the situation for existing products, the Plaintiff seems to disregard the need for an element

''o Para. 46 in fine. t"'t' Case C-38j/01 Danske Bilimportorer l2003lECR I-6065, para.42. Case C-3gllg2 Commiss ion i. Greece [1995] ECR I-1621 . 123 Paras. l6-17. t'o Para.l8. Case C-416100 Morellato [2003] ECR I-9043 seems to fall within this latter category as the requirement related to ceftain types of bread that was not produced in ltaly, but that unquestionably competed with other types of ltalian bread, see para. 37. THE ATTORNEY GENERAL (CtVtL AFFATRS) Written Observations in Case E-16/10 Page 39 of 67

discriminoting between foreign and domestic products. Certainly, both existing and new products may be imported from other states. In the leading Gourmet and Pedicelcases it is explicitly referred to measures affecting domestic and foreign products differently.l" lndeed, the Plaintiff's position would render the discriminatory test inapplicable in cases of strict selling arrangements. The extent to which market access is precluded or hindered for existing products and/or for new products in particular should therefore rather be assessed under these alternatives, discussed in sections 5.3 and 5.4 below.

183. Based on the relevant case law on selling arrangements, it is the Government's conclusion that there is no discriminatory element inherent in the display ban. Unless such an element is demonstrated, it must be held that the measure is a non-discriminatory selling arrangement falling outside the scope of Article LL EEA. In any event, there is clearly no form of established characteristics of the tobacco markets, customs or traditions allowing the EFTA Court to conclude that the display ban amounts to a restriction under Article L1 EEA. That would have warranted complex factual assessments and submissions of evidence that fall outside the advisory opinion procedure.

5.3 Market access is not prevented

184, The test of discrimination in law or in fact has ever since Keck been the key issue in cases concerning selling arrangements. To the extent that also non-discriminatory selling arrangements have been mentioned, it has solely been with reference to paragraph t7 of Keck and the statement that non-discriminatory selling arrangements would not be "such as to prevent their access to the market".

185. With this formulation the ECJ has presumably aimed at providing a very limited exception from the Keck rule on discrimination. Two notable features should be mentioned.

186. First, the ECJ has in all relevant cases used the strict term "prevent (...) access to the market".126 Similar formulations are found in other languages, e.g. in the French and German versions; "emp6cher leur accds au march6" and "den Marktzugang (...) zu versperren", respectively. This indicates that this exception must be limited to situations where market access de jure or de focto is indeed more or less closed. lt should be recalled that some Advocate Generals have advocated for a wider exception for non-discriminatory selling arrangements.t" The fact that the same term of prevention nevertheless is repeated by the ECJ substantiates that it is a deliberate choice to limit the exception to very few cases. t87. The second aspect is that this exception is actually never used directly by the ECJ, at least as the Government is aware of. The ECJ has, on the other hand, constantly held that national selling arrangements that are "likely to limit the total volume of sales in that Member State and, consequently, also to reduce the volume of sales of goods from other Member States" would not bring the measure under the scope of today's Article 34 TFEU (Article 11 EEA) if non-discriminatory in law and in fact.128 ln A-Punkt Schmuckhondet the ECJ emphasised that the prohibition of a "marketing method is apparentlv more efficient and profitable" than the remaining possible methods. This was nevertheless insufficient to conclude that market access

tzs Gourmet, para. 2l; and Pedicel, para. 46. E.g. Gourmet, para. l8; Karner, para. and Nille, para.23. "ut" 51; E.g. Opinion of AG Jacobs in Leclerc-Siplec,paras.41-42.See also section 5.4 below. 'tt E.g. Leclerc-Siplec, para.20 Karner, para. 42; and Burmanjer, para. 30 IHE ATTORNEY GENERAT (CIVIL AFFAIRS) Written Observations in Case E-16/10 Page 40 of67

was prevented as the national measure did "not exclude the possibility of selling those goods in Austria by other methods" (emphasis added).12e

188. The exception from the requirement of discrimination will hence only be relevant in quite extraordinary cases of de jure or de facto market closure. Another interpretation would render the established Keck doctrine redundant.

189. Such a limited supplement to the rule of discrimination seems to be supported by ECJ case law on other types of provisions on free movement of goods concerning the import of products, the export of products, the use of products, as well astoxqtion of products. In allthese types of cases only such very strict non-discriminatory regulations fall under the scope of the free movement of goods provisions.tto

190. The Plaintiff has, on the other hand, argued that the Keck rule on prevention of market access is substituted with a market hindrance test that according to the plaintiff encompasses less strict selling arrangements. This assertion seems to rest on the ECJ cases Commission v. ltolyl3' and Mickelsson ond Roos. The Government is of a different opinion. Rather, the Keck doctrine on discrimination and the narrow exception of market access prevention is confirmed by new case law.

191. Commission v. ltoly concerned a prohibition on motorcycles towing trailers. In this case, the Grand Chamber offered a synthesis of its previous case law. The Court first recalled the principles which Article 34 TFEU enshrines, notably the principles of non-discrimination and of mutual recognition.tt' From these principles it follows that product requirements imply quantitative restrictions (the Cossrs de Dijon case law).133 When it comes to national provisions restricting or prohibiting certain selling arrangements, however, there would not be a q ua ntitative im port restrictionl3a

"... on condition thot those provisions opply to oll relevant troders operating within the notional territory and thot they affect in the same mqnner, in law ond in fact, the marketing of domestic products and of those from other Member States. Provided thot those conditions ore fulfilled, the opplicotion of such rules to the sole of products from onother Member State meeting the requirements laid down by thot Stote is not by noture such as to prevent their occess to the market or to impede occess any more thon it impedes the occess of domestic products (see Keck ond Mithouord, porogrophs L6 and 17)."

1'92, The Grand Chamber hence cites and endorses the Keck doctrine on discriminotion and prevention of market access as far as concerns selling arrangements.

193. This conclusion is not altered by the following paragraph 37 on which the plaintiff relies. On the contrary, even this paragraph seems to confirm previous case law by starting with the word "consequently". Paragraph 37 cannot, therefore, be read without first having established what the Court refers to; notably the Keck doctrine cited in the preceding paragraph 36. When it comes to national selling arrangements, there is therefore no legal basis for amending the well-established case law.

t2e A-punkt S chmuckhandels, paras. 23 -24. "o See WennerAs and Moen, Selling Arrangements, Keeping Keck, (2010) 35 ELRev 387 pp. 390-391 with further references to case law under today's Articles 34, 35 and I l0 TFEU. 13r Case C-l l0/05 Commissionv. Italy 1iOOl1 nCn l-stS. '3'Paras. 33 and34. r33 Para. 35. l3a Para. 36. rHE ATTORNEy cENERAL (CtvlL AFFATRS) Written Observations in Case E-16/10 Page 41 of67

1'94. The Plaintiff refers, furthermore, to the subsequent Mickelsson and Roos case concerning prohibitions on the use of personal watercrafts, a case in which the Keck doctrine is not cited. This cannot, however, have any bearing on the state of law for selling arrangements as Mickelsson ond Roos did not concern such a regulation at all. As the Grand Chamber had consolidated and reaffirmed its case law on Article 28 EC (now Article 34 TFEU), including the Keck doctrine, it would clearly suffice for the Chamber of the Court to cite the part of Commission v. ltoly that was directly relevant to use regulations and not those related to other types of regulations (as selling arrangements).

195. Later case law seems to reaffirm that the Keck doctrine is still decisive when it comes to selling arrangements and that this basically implies a test of discrimination supplemented by a limited exception for measures preventing any market access. ln Ker-Optiko, that did concern a selling arrangement, the ECJ cited several paragraphs from Commission v. ttaly (Case C-110/05). The Court thereafter summarized the relevant criteria for selling arrangements based on Keck and Commission v. ltoly by using the traditional terms of discriminotion and prevention of market access.l3s The decisive test in this case was therefore, as in the other cases on selling arrangements, whether it affected the selling og domestic and national products in the same manner in law and in fact.136

196, The objective and expected effect of the display ban in the present case is to reduce the use of tobacco. The ban is, however, clearly not capable of preventing access to the market for tobacco products, neither for existing nor new products. In particular, the display neither relates to what kinds of sales channels that may legitimately sell tobacco products nor to the number of sales channels. This must be sufficient to conclude that market access is not prevented, cf . A-punkt Schmuckhondels in which it was held that the selling arrangement did not imply an import restriction as it did not exclude the possibility of selling the products in the state concerned,137

tg7. The display ban does not prevent the introduction of new products. lt does not relate to which products may be sold on the Norwegian market, and it does not have an effect of effectively preventing all new products. This also holds true if it is correct, as assumed by the Plaintiff, that the effects of the display ban must be assessed in combination with the already existing and comprehensive ban on traditional tobacco advertising. lt is also worth recalling that the retailers may, as the display ban is regulated in Norway, inform about new products in their shops provided that this is done in a neutral product and price list.

198. Indeed, the Government hopes that the introduction of new products witi Ue more difficult with the display ban. As the prevailing research indicates, there is good reason to expect such an effect, see section 6.4 below. The same research does, however, clearly presuppose that the tobacco companies will still have a firm grip on quite a large part of the population, demonstrating that the market for existing and new products cannot be prevented.

199. In its reasoning the Plaintiff seems to argue that the display ban de focto prevents the marketing of new and less harmful tobacco products. As just indicated, the Government fails to see that the introduction of new products is prevented. When assessing whether market access is prevented by the display ban, it must in any event be excluded to argue that "healthie/' tobacco products will get a more limited market share. Marketing strategies to the

1.3s Ker-Optika, para. 51. ''o Para. 52. t37 A-punkt Schmuckhandels, para. 24. THE ATTORNEY GENERAL (CIVIL AFFAIRS) Written Observations in Case E-16/10 Page 42 ot 67

,,mild,, ,,light,,, effect that certain tobacco products are less harmful, with terms as and are already forbidden by the Tobacco Product Directive as it is seen as clearly misleading, see section 4.2.1 above. Therefore, making it more difficult for such new products to enter the markets is not only due to the display ban, but also due to binding EEA legislation.

200. In sum, the Government finds that the display ban does not imply that market access for tobacco products is prevented, neither for existing nor new products. lf, on the other hand, the court does not follow this conclusion, it must rest on factual assessments that it is for the national court to determine.

5.4 The alternative position: Market access is not hindered

201. Sections 5.2 and 5.3 should have demonstrated that the test of discrimination in law and in fact is the key test in determining whether selling arrangements amount to a restriction under Article 11 EEA, possibly with a limited exception for non-discriminatory arrangements that de iure or de focto prevent market access. Should the Court nevertheless find that even for selling arrangement, non-discriminatory arrangemenrs hindering market access would fall under Article 1L EEA, the alternative position of the Government is that the display ban does not lead to such a market hindrance.

202. A market hindrance test is applied by the ECJ in the two mentioned cases of national provisions regulating the use of products; Commission v. ttoly and Mickelsson ond Roos. These cases demonstrate that the threshold for market hindrance is high, and that it does not differ substantially from the traditional market access prevention test found in the Keck case law.ttt

2o3. After having set out the relevant case law, including the case law on selling arrangements with Keck, the Court in Commission v. Italy held that "consequently", measures treating products coming from other Member States less favourably and product requirements are to fall within Article 28 Ec (now Article 34 TFEU, similar to Article 11 EEA). The principle of non- discrimination is hence emphasised as the key test,t3e The Court then adds that the same applies to measures that hinder market access.

204' The ECJ did not address the more detailed threshold for market hindrance in Commission v. Itoly, probably because the case concerned an outright prohibition on motorcycles towing trailers. Nevertheless, a high threshold - reminiscent of that found in Keck- is indicated in that market hindrance was found to exist only after concluding that consumers would have "practically no interest" in buying the relevant goods, and that the regulation "prevents a demand from existing in the market at issue".1a0 Moreover, in addition to preventing a market for those particular trailers, the use regulation would render the purchase of motorcycles and multi-purpose trailers (trailers that could be used on cars as well as motorcycles) less attractive. This was however dismissed as irrelevant as market access for these goods was not hindered.'4l Again, this shows that the test of market hindrance is influenced by the market prevention test in Keck rather than a possible low-threshold test encompassing all measures influencing market access.

205. The market hindrance test was further clarified in Mickelsson and Roos where the Court set

'" see also wennerds and Moen with further references, pp.392-396 in particular. NolaUty, product requirements l'o will typically be inAireitly discriminatory measures, see e.g. AG Maduro in Joined Cases C-158/04 and 159/04 Alfa Vita Vassilopoulo.s ECR I-8135, paras.43-461 tao [2006] Para. 57. rar Paras. 52-53. THE ATTORNEY GENERAL (ClVtL AFFATRS) Written Observations in Case E-16/10 Page 43 of 67

out the operative test in paragraph 28:

"where the notionol regulotions ... hove the effect of preventing users of ... [the productsl from using them for the specific ond inherent purposes for which they were intended or of greotly restricting their use, which is for the nationol court to oscertoin, such regulations have the effect of hindering the occess to the domestic morket in questions for those goods."

206. In other words, non-discriminatory use regulations are such as to hinder access to the market within the meaning of Article 11 EEA only if they prevent or greatly restrict the use of the products. Conversely, measures limiting the use of products to a lesser extent fall outside the scope of Article 11 EEA. Again, this demonstrates the high threshold inherent in the market hindrance test,

207. This seems to be confirmed by the concrete application of this test in Mickelsson and Roos. The Court left it for the national court to ascertain whether the Swedish regulation prevented or greatly restricted the use of personal watercraft (paragraph 28, just cited). This was done despite the fact that it was undisputed that Swedish authorities had not designated any waters for use by personal watercraft and such use was therefore only permitted on general navigable waterways.to'The actual possibilities for using personal watercrafts on these waterways were very limited. For instance, the Advocate General found that the possibilities were only marginal.la3

208. Judging from the norms set out and applied in Commission v. Italy and Mickelsson and Roos it is the opinion of the Government that the threshold inherent in the market hindrance test is very high. lt seems to be fairly similar to the test of prevention of market access as set out in Keck as it encompasses only those measures preventing market access or restricting market access greatly. This seems to be significantly more qualified than the "substantial" market access test first proposed by some Advocate Generals.laa Notably, the Court did not follow the proposal from AG Bot suggesting to include all non-discriminatory rules that "prevented, impeded or rendered more difficult access to the market for products from other Member States".las Instead the Court in these two cases seems in essence to have followed the proposal from AG Kokott who argued that only those non-discriminatory measures that posed "a barrier to access to the market" would imply import restrictions, encompassing measures that prohibited or only allowed for a marginal use of a certain product.la6 This seems not only very similar to the operative test applied by the Court in Mickelsson and Roos (preventning or greatly restricting use) but also fairly similar to the traditional test of market prevention under the Keck doctrine.

209. The Government submits that a display ban as the Norwegian one does not imply any hindrance of market access. lndeed, the display ban cannot be expected Io prevent access to the market or to greotly restrict the use or sales of tobacco products.

2IO. As held below, some effects on the tobacco consumption may indeed be expected as a result of the display ban, and most of this effect will probably concern young people and people who ta2 Para. 25. to3 Mickelsson and Roos, para. 26; and the Opinion of AG Kokott , para. 79 . lii S.g. Opinion of AG Jacobs in Leclerc-Siplec,paras.4l-42. 'o' Opinion of AG Bot in Commission v. Itily, para. I I l. 'ou Opinion of AG Kokott in Mickelsson ord Roos, paras. 67-70 and 72. T.!-{E ATTORNEY GENERAL (CtVtL AFFATRS) Written Observations in Case E-16/10 Page 44 of 67

are trying to quit or have recently quit using tobacco. The effects are very difficult to measure, in particular at the early stage of display bans in many countries. lt must nevertheless be evident that the display ban will be rated as successful even with a relative small reduction in the use of tobacco in the population as a whole. Hence, even a success rate would not imply that market access would be prevented or greatly restricted.

21'1'. Hence, there is no restriction under Article 1"1 EEA even if the Court should, contrary to the Government's opinion, consider that the test of market hindrance is relevant to selling arrangements. In any event, this test may, as the other issues to be settled under question j. from the referring court, require factual assessments related to the Norwegian market that it is for the national court to make.

5.5 Answer to question no 1

212. Based on the above, it is the Government's opinion that a display ban, as the one found in the Norwegian legislation, does not imply a measure equivalent to a quantitative restriction under Article 11 EEA. Even though it in principle should be for the national court to make the final assessment on this point, the Government finds that there is sufficient basis to conclude with a negative answer to question no 1. No discriminatory elements have been demonstrated and market access is not prevented by the display ban.

21'3. ln the alternative, should the EFTA Court follow the normal procedure of leaving the assessment to the national court, it should be held by the Court that a display ban, as the one provided for under the Norwegian legislation, does not constitutes a measure having equivalent effect to a quantitative restriction on the free movement of goods under Article 11 EEA unless it is shown that the ban does not affect in the same way, in fact and in law, the marketing of national products and of products from other EEA states.

QUESTION NO 2

6.1 Introduction

21,4. The second question from Oslo tingrett reads:

2. Assuming there is a restriction, which criterio would be decisive to determine whether o disploy prohibition, based on the objective of reduced tobocco use by the pubtic in generol and especiolly amongst young people, would be suitoble and necessory hoving regard to public health?

215. The referring court hence seeks guidance on the application of the principle of proportionality in the present case. This issue is relevant only if the national court concludes that the display ban constitutes a restriction under Article 11 EEA. The Government fails to see that the display ban falls under the scope of that Article, and has argued that there is sufficient basis for the EFTA Court to conclude accordingly. Should the Court follow this reasoning, the Court should therefore in principle simply state that it is not necessary to answer question No 2.

2L6. lf the Court finds reasons to answer the question on proportionality, it is the Government's firm opinion that the display ban is indeed compatible with the proportionality principle. TiIE ATTORNEY GENERAL (CIVIL AFFAIRS) Written Observations in Case E-16/10 Page 45 of67

2I7. At the outset, it must be emphasised that the display ban is substantiated by reasons of public health. The EFTA Court and ECJ have constantly held that the health and life of humans rank foremost among legitimate objectives, and that this influences the proportionality test. lt is for each state not only to determine the level of protection opted for, but also the way in which this level is to be achieved, irrespective of different choices by other EEA States. Pedicetoffers one example from the EFTA CourttoT and Ker-Optika is a recent example from the ECJ:ta8

"ln that regord, if that meosure is within the field of public health, occount must be token of the foct thot the heolth and life of humons ronk foremost omong fhe ossets ond interests protected by the Treoty ond thot it is for the Member Sfofes to determine the level of protection which they wish to offord to public heolth and the woy in which that level is to be ochieved. Since the level may vary from one Member Stote to onother, Member States should be allowed o meosure of discretion (see Joined Coses C-570/07 and C-571/07 Blonco Pdrez ond Choo G6mez [2010] ECR l-0000, parograph 44 ond the case-low cited)."

218. The proportionality test consists of the tests of suitability and necessity, summarized inter olia in Pedicel:lae

"Under the proportionolity principle, the measure chosen by an EEA Contracting Party must be proportionate to the oim pursued. lt must be estoblished thot meosures token ore suited to achieve the objective sought, and that the same objective moy not be as effectively ochieved by meosures which are less restrictive of intra-EEA trode."

219. The Government is of the opinion that the EU and WHO law and recommendations presented in section 4 above, are important when assessing the proportionality of the display ban. The significance is twofold.

22O. First, the relevant EU and WHO documents provide extensive arguments and research substantiating the essentialfoctuol points of the case:that advertising is effective in increasing tobacco sales; that the display of tobacco products constitutes advertising; that bans on advertising must be comprehensive in order to be efficient; and finally, that a strict display ban will contribute to reduced tobacco use by young people as well as by adults (in particular by "quitters"), and that this effect will be increased in the longer term by a signal effect due to the concealing of the tobacco products.

22L. Second, EU and WHO law and recommendations represent legol orqumenfs making it difficult to see how a display ban as the Norwegian one would be disproportional. Indeed, as demonstrated in section 4.4 above, under the WHO Framework Convention the display of tobacco products constitutes advertising that must be subject to a comprehensive bon, cf. Article 13 No 2.tto The Guidelines to this provision clarify that this is the correct interpretation of the Convention and not only supplementary and non-binding recommendations. However, as held above,ttt it is not necessary to determine in the present case whether the obligation to implement a comprehensive advertising ban requires display bans in all or most Convention states. The essence is that the Convention and the Guidelines, clearly recommending the introduction of display bans, underscores that the principle of proportionality cannot be

redtcet, para. )). ta& Ker-Optika, para. 58. tae Para. 56. ''o Cited above, see also Annex 8. r5r Section 4.4 infine. T#E ATTORNEy cENERAL (CtvlL AFFATRS) Written Observations in Case E-16/10 Page 46 of 67

interpreted to the effect that the states complying with this consensus-based recommendation are violating EU and EEA law.

222. As held in section 5.1 above, it is not for the EFTA Court under the advisory opinion procedure to assess the facts of the case or to assess whether national law is compatible with EEA law. This is also reflected in the question from the national court seeking guidance regarding the ref evant criterio for its assessment. lndeed, the principle applied in Pedicelis equally applicable to the present case:ttt

"As the opplication of the proportionality test calls for an onalysis of the circumstonces of low and of foct which charocterise the situation in the EEA Controcting Porty concerned, the notionol court is in o better position thon the Court to undertake it (see Cose C-405/98 Gourmet, ot poragraph 33). The Court con only give general guidance os to which elements ore to be taken into occount."

223. The Government will provide guidance on the relevant public health objectives in section 6.2, on the proportionality test more generally in section, on the suitability of the display ban in section 6.3 and on the necessity in section 6.4. Based on the advisory opinion procedure principles, the Government will not assess all issues in detail, and will notably not present more than small parts of the evidence available on the public health effects of tobacco control measures such as display bans. These are issues that are for the national court to decide and should hence also primarily be presented before the national court.

224. Article 13 EEA prohibits certain restrictions that constitute means of arbitrary discrimination. There is, however, no evidence suggesting that the display ban would be contrary to this provision under Article 1,3, and no arguments to this effect have been presented.ts3

6.2 Legitimate objectives

225. lt is undisputed that the display ban seeks to achieve legitimate public health objectives. tt is nevertheless appropriate to reiterate the essence of the relevant objectives from section 3.4 above since these objectives form the starting point for the analysis of suitability and necessity.

226. The overall objective of the display ban is to reduce tobacco use and thereby reduce the very severe health problems caused by tobacco and in particular by smoking. Tobacco use is undoubtedly a fundamental risk to human life, see section 2.2 in particular.

227. The regulation is targeted both at smokers and snus users in general and young people in particular. lt is anticipated that the ban will be most efficient in relation to young people and people who are trying to quit or have recently quit using tobacco. The effect of the tobacco use in the population as a whole is primarily expected due to fewer persons starting to use tobacco and more persons succeeding in quitting (or in staying quit). In addition, it is an aim to contribute to a change in the general attitude towards tobacco products by providing a signal effect demonstrating that tobacco products are not as other normal products available in the outlets. lt is expected that a ban on showing the products in the shops will contribute to

tsz Para. 57. r53 See also Pedicel, para. 43 for the same conclusion as regards the ban on advertising for alcoholic beverages. T.:rE ATTORNEY GENERAL (CtVtL AFFATRS) Written Observations in Case E-16/10 Page 47 of 67

denormalise tobacco use. Such a desired change in perceptions and attitudes towards tobacco products will in turn increase the health effects of the display ban.

228. Such a signal effect, that is underlined in the preparatory works leading up to the adoption of the display ban,tto is widely acknowledged as an integrated effect of banning advertising and the visibility of products. Such an indirect effect must be expected to appear gradually and over some time. This effect is emphasized in several sources, including the updated SIRUS report assessed in section 6.4.5 below. Reference is also made to the WHO Global Tobacco Epidemic report from 2009, stating thatlss

"Tobocco advertising, promotion ond sponsorship con make smoking more sociolly acceptable, impede efforts to educate people about the hazords of tobacco use, ond strengthen the tobacco industry's influence over medio, sporting ond entertainment businesses."

229. lt is also worth noting that the Commission argued along these lines when adopting the Tobacco Prod uct Directive:1s6

"As regords the subtle implicotions of the odvertising of o product such os tobacco, the IJnited Kingdom exomple is significont. In this Member State two thirds of the odult smokers say they wont to stop, but half agreed with the stotement that smoking connot be all that dongerous, or the government would not allow tobacco to be advertised."

6.3 The Proportionality test - burden of proof etc.

230. As held in section 6.1- above, proportionality consists of two elements; suitability and necessity. The questions are thus whether the measure employed (tfre dispiay ban) actually is suitable or adequate to ensure the public health objectives pursued and whether there are other means that are equally effective but less restrictive of intra-EEA trade. These basic starting points seem undisputed.

23I. The parties to the case before Oslo tingrett seem to disagree on some aspects related to the EEA requirements of presenting proof for the proportionality of a legislative measure. Indeed, it follows from established case law that it is for the national authorities to demonstrate that a restriction is suitable and necessary. However, this is no more than a starting point, and the content of the national authorities' burden of adducing proof differs depending on the characteristics of the sector and the case concerned.

232. The evidence required to justify a restriction is also related to the level and intensity of judicial review. As noted in section 6.1, public health ranks foremost among legitimate interests protected, and the EEA and EU States have the discretion to decide on the level of protection and the way in which that level is to be achieved. Hence, the legal and factual characteristics of the health sector indicate that a cautious approach to judicial review is warranted.

233. ThereareseveralexamplesofsuchacarefulapproachfromtheECJandtheEFTACourtto judicial review in relation to measures aimed at reducing alcohol abuse, which have much in common with tobacco control measures. ln Aragoneso national measures placing restrictions

rsa See section 3.4 with references. '" wHo (2009) p. 52. ''o COM(2001) 283 final, p. 9 (section 7.3.2). rirE ATTORNEY cENERAL (CtVlL AFFATRS) Written Observations in Case E-16/10 Page 48 of67

on alcohol advertisement passed the proportionality test on the grounds that they were not "manifestly unreasonable".lsT In Pedicelthe EFTA Court held that it must be "apparent" that less restrictive measures exist.1s8

234. The obligation to adduce evidence must not be applied in a way that will make it difficult to adopt new measure aimed at reducing tobacco consumption. In this sphere, the legislator is faced with particular problems when it comes to documentation. ln RAND (2010) it is held that "...obtaining robust empirical evidence on the impact of such measures is fraught with difficulties", inter alio because different tobacco control measures are implemented at the same time:1ss

"... quantifying the impact of banning or restricting promotions ond disploy of tobocco products ot retoil stores presents some important chollenges, not leost becouse such meosures are never implemented in isolation. It is therefore difficult, if not impossible, to qttribute impact to specific tobacco control meosures,"

235. In addition, the effect of tobacco control measures will typically appear gradually and over time. Hence, strict documentation requirements, or a narrow definition of what is to be considered as proof, could make the adoption of any new measures in this sector impossible. Indeed, the ECJ has held that when the assessment of proportionality depends on an assessment of "future effects ... [that] cannot be accurately foreseen, [the] assessment is open to criticism only if it appears manifestly incorrect".150 This should be equally applicable to the present case.

236. ln his opinion in Case C-376lg8and Case C-74/gg tmperialTobocco, in relation to judicial review of the first tobacco directive, AG Fennelly holds that it suffices that there is "reasonable grounds" for adopting the measure.tut He also sets out quite comprehensively the reasons why one cannot require "hard" evidence in this sphere, but also refers to the undeniable fact that advertising increases consumption. The following passages are directly relevant also to the present case (emphasis added):162

'759. I would odvocote, therefore, that a similor opproach be adopted in the Community legol order. Where it is estoblished that a Community meosure restricts freedom of commercial expression, as the Advertising Directive cleorly does, the Community legislotor should olso be obliged to sotisfy the Court that it hod reosonoble qrounds for adoptinq the measure in question in the public interest. ln concrete terms, it should supply coherent evidence thot the meosure will be effective in ochieving the public interest objective invoked - in these coses, o reduction in tobocco consumption relotive to the level which would otherwise have obtained - ond thot less restrictive medsures would not have been equally effective.

760. The evidence required to justify a restriction will depend on the nature of the cloim mode. We ore here largely concerned with the objective assessment of the likely effects of the r57 Joined Cases C-1l90 and C-176/90, Aragonesa de Publicidad [991] ECR I-4151, para. 16. tsg Pedicel,para.6l. ''n RAND (2oro) p. t94. 'uo Case C-504104 Agrarproduktion Staebelow 120061ECR I-679, para. 38. 'o' A similar criteria was applied when substantiating the advertising ban in the Tobacco Product Directive; it was "reasonable to assume" that the ban would have effect, see COM(2001) 283 final, p. 10 (section 7.4). 'u'Opinion in Case C-376198 and Case C-74lgg ImperialTobacco t20001 ECR I-841g,'purur. 159-160. The fact that the ECJ annulled the directive was due to lack of an appropriate legal basis, and has no bearing on the reasoning put forward by the AG in relation to the issue of evidence. T.HE ATTORNEY cENERAL (CtVtL AFFATRS) Written Observations in Case E-16/10 Page 49 of67

Advertising Directive. The legislotor should not enjoy as wide o margin of appreciation as in the cose, for example, of the protection of morals. However, the Community should not be prevented from octinq in the public interest simplv becouse iustification of its action necessarilv depends. not on hord scientific studies. but on evidence of a social scientific character. which predicts. on the bosis of post behoviour. the future responses of consumers to chonqes in their level of exposure to promotional moteriol. Furthermore, where the Community legislator con show thot it acted upon the basis of reputoble speciolist studies in the field, the foct that other opporently reputoble studies have reoched o contrary conclusion does not, in itself, show thot the legislator did not have reasonable grounds for octing. ln the present cQses, the legislotor's ossessment of the effects of tobacco advertising is consistent with the Court's own stotement that [i]t is in foct undenioble thot odvertising octs os an encourogement to consumption. Furthermore, most odvertising connot be so precisely focused thot it addresses only existing smokers who wish to choose between bronds, to the exclusion of others who might be incited either to begin smoking or to abondon plans to give up smoking."

237. A similar approach was taken in Case C-4|I/O! British American Tobocco, which concerned the second tobacco directive. In this case, the ECJ found it sufficient that the measure was "likelv to make an effective contribution" to attaining the relevant aim.tu'

238. Reference is also made to Case C-262/O2 Commission v. France, where AG Tizzano held that is was "reasonable to maintain" that an advertising ban on alcohol would have effect,tto and to Case E-1/06 ESA v. Norwoy, where the EFTA Court stated that it was "reasonable to assume" that an exclusive right system in the gambling sector would be more effective than alternative measures.tu

239. On this background, the Government submits that the same standard must apply in the present case, lt must be sufficient that, relying on all available sources, it is reasonable to assume that the display ban will be suitable and necessary. Since such measures necessarily are based on evidence of a social scientific character, including future predictions, there can be no obligation to provide proof which with certainty will show that the display ban will work, As already noted, strict documentation requirements in this sphere would in practice hinder the adoption of any new measure.

240. Finally on this point, the Government notes that even though relevant documentation must be forwarded, the ECJ has rejected the notion that national authorities must be able to produce a particular study supporting the proportionality of a restrictive measure prior to its adoption.165

6.4 Suitability

6.4.7 The suitability test

241'. The display ban will be suitable if it is an adequate or appropriate means in reducing tobacco use. The question is hence whether it can be expected that the display ban will contribute to reduce tobacco use. This question must be assessed for the groups targeted by the legislation;

163 Case C-4gllol BritishAmericanTobacco[2002)ECRI-11453,para.129. SeealsoOpinionof AG Geelhoed, para.249. 'uo Opinion in Case C-262102 Commissionv. France [2004] ECR I-6559, para. 81. 'o' Case E-1106, ESA v. Norway, para. 51. 166Case C-316107 MarkusSto/3,8September2010,notyetreported, paras.70-72 THE ATTORNEY GENERAL (CIVIL AFFAIRS) Written Observations in Case E-16/10 Page 50 of67

in particular young people and people considering quitting tobacco use (or to stay quit thereof), but also the population as a whole in a somewhat longer term.

242. The test of suitability is basically a question of evidence; is it reasonable to assume that the display ban will have some kind of effect, i.e. that it will contribute to reduction in tobacco use? As just noted, the national authorities' obligation to show that a measure is suitable will differ depending on the particularities of the sector and case concerned. As regards measures aimed at reducing tobacco consumption, there are particular difficulties related to the possibility of providing "hard" proof of a new measure. Moreover, the assessment of suitability must appreciate that the measure at stake is expected to have gradual effects over some time.

243. lt is vital that the obligation to adduce evidence is adapted to these circumstances in a way which will not hinder the adoption of legitimate public health measures. As held in section 6.3, it must therefore be sufficient that it is reosonoble to assume or reosonoble to expect that the display ban will contribute to reducing the use of tobacco in a short or longer term.

244. Indeed, in cases as the present one, where the states enjoy a wide margin of discretion, this also implies "a margin of discretion in determining ... the measures which are likely to achieve concrete results."tut Hence, it seems that the state has a margin of discretion in establishing whether the measure will be suitable.

245. Moreover, as held in Ahokoinen, it is sufficient that there is a portial effectt6t, i.e. that the display ban will have some - great or more limited - effect of tobacco use in one or more of the target groups. As held by AG Maduro in that case, the question is whether "the measure has any benefits at all for the legitimate interests on which the Member State relies."ttt The ECJ seemsto rejectthe suitabilityof a measure only if the effect is purely theoreticol.rlo

246. In order to be suitable, the EFJ and the EFTA Court have in some cases assessed whether the national measure forms part of a consistent and coherent policy. These are cases of clearly inconsistent regulations, in particular where the stated objective is not in reality pursued. The Government cannot see that this case represent a natural opportunity to analyze this case law in detail. The display ban is fully consistent with the aims pursued and forms an inherent element in a strict and coherent policy against the harmful effects of tobacco use.

247. Since the suitability test in the instant case turns on questions of evidence, the EFTA Court should refrain from analysing this question in any detail. A reference to the test set out above should suffice as guidance for the national court. However, based on the arguments presented in the case thus far, and in order to provide some information on the vast range of evidence supporting the suitability of display bans, the Government will nevertheless provide some more information and arguments. This is warranted particularly because the Plaintiff's arguments on this point, as the Government sees it, are manifestly unfounded.

'ut Case C-394197 Heinonen [1999] ECR I-3599, para. 43 and the Opinion by AG Saggio, para. 32; and Case C- 434104 Ahokainen [2006] ECR l-91'77, para.32. t6t Ahokoirtn, para. 39. r6e Opinion in Ahokainen, para. 24. tto Case C-366/04 Schwarz [2005] ECR I-10139, paras. 35-36. THE ATTORNEy GENERAL (CtvtL AFFATRS) Written Observations in Case E-16/10 Page 51 of 67

6.4.2 Expected effects of the disploy ban - an outline

248. As held several times above, it is the definite opinion of the Government that the display ban will be effective - it will contribute to reduction in tobacco use and thereby to a fulfilment of fundamental public health objectives.

249, The suitability test must appreciate all the elements mentioned in sections 6.3 and 6.4.1 above, in particular the difficulties in measuring the effects of an instrument such as the display ban, the broad objective of reduced tobacco use in the population in general and in the group of young persons, and the expectation that the effects will partly arise quite shortly after the introduction of the ban and partly gradually over several years, see sections 3.4 and 3.5 above and also further below in this section.

250. For these reasons one cannot draw conclusions from sales numbers in itself, for instance sales numbers in the year following the introduction of the display ban, That being said, such data are relevant, but must be read carefully together with independent research, see further below. At present, sales numbers and other data from the Norwegian market for 2010 are collected and assessed, but no analysis is at present finalized.

251. Instead of focusing on sales numbers alone, independent researchers seem to agree on the necessity of a broader and more comprehensive assessment of the effects of display bans. Among important factors are, in addition to the existing experience and research on display bans, the following elements: (1) Advertising is an effective means to enhance sales, especially to reach new and young customers, and bonning advertising effectively reduces tobacco use; (2) the more comprehensive the advertising ban is, the more efficient it is; and (3) the display of tobacco products has effects similar to those of traditional advertising.

252. The need for a broad approach is summarized by the Norwegian Institute for Alcohol and Drug Research - SIRUS (Statens institutt for rusmiddelforskning) in an updated evaluation of the knowledge basis for a display ban of 20 December 2Ol-0.171 SIRUS holds, inter alio, that a combination of several approaches is the best method for assessing the effects of a display ban. SIRUS continues:

"Thus STRIJS considers thot o combinotion of i) the findings of the few studies thot hove sought to meosure the effects of a bon on point-of-sale tobacco disploys directly, ii) the consistent findings of the comprehensive ond methodologicatly diverse research on the effects of tobocco odvertising and iii) psychological theories obout consumer behoviour will form o robust basis for predicting the effects of o bon on tobacco disploys."

253. Research and evaluations from other independent sources seem to follow the same methodology. This will be further substantiated by analyzing a selection of the relevant research sources on the topic, focusing on three sets of documents summarizing existing research and experience; relevant WHO documents, the RAND report (2010) and the SIRUS report (2010).

254. All these sources conclude that a display ban will contribute to reduction in tobacco use. Moreover, they all emphasize that the effect will probably be greatest for young people, but also for persons wanting to quit using tobacco (or who have quitted). In addition, they find that there will probably be an additional signal effect as a ban on the display of products will r7r See section 6.4.5 below for further information on this 2010 SIRUS reporr. THE ATTORNEY GENERAL (CIVIL AFFAIRS) Written Observations in Case E-16/10 Page 52 of 67

contribute to denormalise tobacco use. All these elements are fully in line with the objectives pursued bythe Norwegian legislation, and hence substantiate the suitabilityof a display ban as the one provided for in Norway.

255. Taking into account the advisory opinion procedure, the Government will for most parts only refer to the findings in these reports without going into the more detailed research that these reports are based upon (sections 6.4.3 - 6.4.5). However, some more detailed arguments should be presented in order to show that the alternative line of reasoning proposed by the Plaintiff in this case and by the tobacco industry more generally should not be followed (section 6.4.6).

6.4.3 WHO assessment of display bon effects

256. As held above, in particular section 4.4, the World Health Organization has on several occasions emphasized the sales-enhancing effect of tobacco advertising and that the display of tobacco products at points of sale in itself constitutes advertising and promotion - even "a key means of promoting tobacco products and tobacco use, including by stimulating impulse purchases of tobacco products, giving the impression that tobacco use is socially acceptable and making it harder for tobacco users to quit".ttt This consensus statement from the Guidelines to the Framework Convention on Tobacco Control also includes statements concerning the need for comprehensive prohibitions as these will be substantially more effective than partial prohibitions.tt' This is set out also in other WHO documents, two of which shall be mentioned here.

257. In its 2OO9 report on the Global Tobacco Epidemic the WHO notes that the tobacco industry spends tens of billions of dollars each year on advertising, promotion and sponsorship. The industry has a history of strongly opposing any marketing ban, simply "because they are highly effective in reducing tobacco use."tto The report further holds that advertising can make smoking more socially acceptable (cited in section 6.3 above), and continues by stating that complete bans are effective, whereas "partial bans have little or no effect:

"A comprehensive ban on all advertising, promotion ond sponsorship protects people from industry morketing tactics ond could decrease tobacco consumption by about 7%, independent of other tobacco control interventions. Complete bons block the industry's obilitv to continue marketino to young people who hove not yet storted to use tobocco, and to adult tobdcco users who want to quit. Partiol bans have little or no effect: if advertising is prohibited in o particulor medium, the tobacco industry merely redirects expenditures to places where odvertising is permitted)."

258. lt should be recalled from section 4.4 that the WHO parties have clearly stated that the display of tobacco products forms advertising under the Framework Convention that therefore is subject to the obligation of introducing a comprehensive advertising ban. Hence, making the advertising ban more comprehensive with the display ban will also make it more efficient. ln this respect, reference is also made to the 2008 WHO document "A policy package to reverse the tobacco epidemic" in which it is stated (with further references that are omitted here, emphasis added):17s

't' Guidelines to Article 13 of the Framework Convention, cited in section 4.4 above, enclosed as Annex No 9. 't' Guidelines points 5-6. cited in section 4.4 above. '70 wHo (2009)p.52. 'tt WHO, mpower, A policy package to reverse the tobacco epidemic, see THE ATTORNEY GENERAL (CIVIL AFFAIRS) Written Observations in Case E-,|6/10 Page 53 of67

"To be effective, bons on direct odvertising should be comprehensive and cover alltypes of media ond odvertising. Otherwise the tobacco industry will find alternative advertising vehicles to corry their messqge to torget populotions. lf odvertising is prohibited in a particular medium, the tobacco industry merely shifts expenditures to places where advertising is permitted. Bans should include, but not be limited to, newspopers ond mogozines, radio ond television, billboards ond the lnternet. It is olso important to bon point of sole odvertisina in retoil stores, includina product displovs and siqnoae. This limits or blocks the ability of morketing to cue tobocco users to moke a purchase. This intervention can be further strengthened by keeping cigarettes behind the counter ond out of view so that customers must ask specificolly if the store sells them. This smoll extro effort required of customers presents o lorqe borrier to purchase."

259. Hence, these WHO documents demonstrate the scientific basis for the conclusion that the display of tobacco products forms an important marketing strategy and that a display ban will effectively reduce the advertising effect caused by the presence of the products. lt should be recalled that as gradually more forms of traditional advertising have been prohibited in many countries, the tobacco industry has focused increasingly on the advertising effects of the products themselves with brand names, colourful packages etc. Indeed, the Plaintiff in the present case argues that the use of logos and brand names is the key way of "communicating brand identity" with the customers"176, i.e. to seek to increase sales and revenues.

6.4.4 RAND (2010) on display ban effects

260. The report from RAND Europe, assessing research and experience on the effect of display bans, concludes to the same effect in its analysis in section 11.2. This part of the report, cited above and enclosed as Annex No x to these observations, starts off by referring to research indicating that promotions and displays of tobacco products in retail stores are "an important means through which consumers become aware of their ability to purchase tobacco products in a given location" and "particularly key to the tobacco industry's marketing strategy". lt plays "a key role in triggering tobacco product purchases by underage consumers in particular - as well as by regular smokers, smokers attempting to cut down or quit altogether, and non- smokers."17t

261,. In line with these research findings it is held, fully in line with the rationale of the Norwegian legislation set out in section 3.4 above:178

"lt follows that the rotionole for restricting or bonning promotions ond displays in retail stores is principolly twofold: to prevent the uptoke of smoking in youths in p,articular and to remove cues thot could trigger the desire to smoke in consumers trying to quit, stoy quit or cut down on their tobacco consumption. Following on from this rationole, the main health benefit derived from restrictions or bons of promotions ond displays at retoil stores is to ochieve a reduction in smoking-reloted morbidity and mortolity rotes through reductions in tobocco use."

h_l,tp : //www. who. int/tobacco/mpower/rnpower_en gl i sh.pdf. 'T6Reference for an advisory opinion section 41. 'tt RAND (2oro) p.192. "t RAND (2oro) p.192. THE ATTORNEY GENERAL (CIVIL AFFAIRS) Written Observations in Case E-16/10 Page 54 of67

262. lt is referred to relevant research on advertising in general and on displays in particular, and t7s the report states the following on the expected effect:

"The majority of the evidence in the literoture reviewed with regard to the impoct of promotions ond displays of tobacco products in retail stores shows thot there is o correlotion between tobacco promotion and people toking up smoking or continuing to smoke. This evidence is particularly strong with respect to young people who ore thought to be more susceptible to such promotions ond disploys as well os not 'fully copoble of understonding the risks' of smoking".

263. The report then emphasizes the difficulties in obtaining robust empirical evidence concerning the effect of one single tobacco control measure,tto see section 6.3 above, in particular. This is followed by a critical assessment of the Padilla-report financed by Philip Morristtt (discussed in section 6.4.6 below) before stating that a ban on the visible display of tobacco products will be more efficient than a ban on promotions at the point-of-sales and more efficient than restrictions (or partial bans) on the display of tobacco products.182 The latter element is commented in section 6.5.3 as it seems to be of primary interest to the assessment of alternative measures.

264. The overall conclusion in the RAND report is that a display ban is highly recommended as it will be effective, in particular for youths, and in particular if adopted as a total ban and not only as a partial ban:ttt

"Reduction in smoking prevolence omong youths in particulor is likely os evidence shows promotion ot PoS influences youth smoking behaviour and uptake of smoking. A similor impoct moy be observed, albeit smaller, on odult smokers os bans on promotion remove smoking cues.

Note that meosures 3, 4 ond Stto are intertinked. The strongest measure, which would consist of o complete ban on PoS promotions and disploys, would hove the strongest heolth impact of oll the measures os it would remove oll smoking cues from the sight of consumers.

lmpact likely to be strongest on youths although some adult smokers ond would-be quitters may also be positively offected. No negotive social impoct."

6.4.5 S/RUS (2008) ond STRUS (2010) on disploy bon effects

265. As held in section 3.5 above, the SIRUS 2008-report was an important element in the reasoning of the legislator when adopting the display ban with effect from l- January 2010 as it summarized and analyzed existing research. SIRUS concluded that there was reason to believe that the display of tobacco products constitutes promotion that works along the same lines as traditional advertising, and that one could expect that a display ban would be effective in reducing tobacco use.

'tn RAND (2or o) p. r 93. 'to RAND (2oro) p.194. r8r RAND (2010) pp. 194-195. (2olo) p. 195. tt'RAND(2010)'t'RAND p.202(table 11.2.8) andp.235 (table 12.5).Adisplaybaniscategorizedasparticularly recommendable with two "stars" (**), see the right column of the tables. r8a Banning point-of-sales advertising, restricting displays, and banning displays, respectively. Ti-IE ATTORNEY GENERAL (CIVIL AFFAIRS) Written Observations in Case E-16/10 Page 55 of 67

266. In its 2008 assessment, SIRUS refers to extensive research on effects of advertising and advertising regulation as well as on consumer psychology related to the aspects triggering purchase of products like tobacco products. Among the clear conclusions is that;18s

"lrrespective of the methodological approoch, there is consensus in the research community thot exposure to tobacco advertising increases the probobility that young people witl begin to smoke. Tobacco odvertising olso increases oggregated tobocco consumption, although to a limited extent. Restrictions, particularly a ban on tobacco advertising, reduce tobacco soles."

267. At the time for the 2008-report, there was only one study that explicitly concerned a display ban.ttu SIRUS hence discussed whether the strong, consensus-based conclusion on traditional advertising could be applied as concerns the display ban. SIRUS concluded this issue positively. The overall conclusion in the full text report reads:ttt

"To summdrise, our view, bosed on empiricol reseorch, theoreticol insight and logicot reosoning, is that there are grounds for believing that tobacco disploys affect consumer behoviour along the some dimensions as traditionol advertising. However, it is difficutt to soy whether the strength of the effect is greater or less than that of troditional advertising, ond to whot extent heolth warnings on the pocks modify the advertising impact. tt is likely thot point-of-sale displays have the greatest effect on the segment of recent quitters, while research hos shown thot troditionol advertising primorily influences young people. One possible advantage of point-of-sole displays over troditional advertising is thot the messoge to the consumer is conveyed in the immediqte vicinity of the source of supply. Exposure to a cigarette advertisement in d newspoper usuolly occurs in o different context from exposure ot the point of sole."

268. The Plaintiff contests the findings of SIRUS on several grounds. None of these arguments are in the Government's opinion substantiated. lt is true that the report was drawn up in a relatively short time (approximately five months). There is, however, nothing that indicates that the report does not fulfil high research standards. lt is an extensive report with numerous research references, and it falls within the very field of expertise of the SIRUS, researchers. lt is moreover incorrect as claimed by the Plaintiff that a final political decision to adopt the display ban was already taken at the time the report was commissioned. The SIRUS report was one out of several factors substantiating such legislation.

269. Additionally, the Plaintiff claims that SIRUS was only asked to consider the effect of traditional advertising, and not the effect of the display ban. This is simply incorrect. As held in section 3.5 above, and cited in section 2.4of the reference from Oslo tingrett, the assignment consisted of two main elements; (1) an update on the effects of traditional advertising; and (2) an identification of effect evaluations of the display ban more concretely. The Ministry acknowledged the limited documentation available specifically on the effect of display bans and considered that such a ban as a prolongation of the advertising ban. This did not at all bind SIRUS to focus only on traditional advertising. Rather, it was a realistic approach by the

185 Section 7 of the 2008 SIRUS report (on p. 56 in the full text version cited section 3.5 above), cited in English as translated by the independent translator as part of the SIRUS 20 l0-report, see further below. 'oo Wakefield et al, The ffict of retail cigarette pack displays on impulse purchase. Addiction, 2008 Feb;103(2):322-8. Epub 2007 Nov 27. 'o' Section 7 (p. 57 in the full text version). The conclusion is in substance identical with the conclusion in the English summary, cited in section 3.5 above. T.HE ATTORNEY GENERAL (CIVIL AFFAIRS) Written Observations in Case E-16/10 Page 56 of67

Ministry in line with the position taken by leading independent research environments, partly cited in these observations.

270. Finally, the Plaintiff claims that the studies relied upon by SIRUS are irrelevant because they partly are made in countries with less strict regulations of traditional advertising than the one found in Norway. However, the relevant research relates to states with differing advertising regulation, and the arguments are in any event fully applicable to display bans irrespective of the strictness of traditional advertising bans. Indeed, it must be expected that the display of tobacco products constitutes a more important marketing strategy in states where few other advertising mechanisms are available."t Hence, a display ban will probably be more - and not less-efficient in a state like Norwaywith a comprehensive ban on traditionaladvertising.

27L. Despite having a solid basis for its conclusions, the Ministry asked SIRUS to update its assessment of the knowledge basis for a display ban. This assessment ,was delivered 20 December 2010 and is enclosed as Annex No 1"0.18s SIRUS is of the opinion that subsequent research has strengthened the basis for a display ban, and that a broad approach is the best method to make this assessment. There is a "robust basis" for predicting the effects of a display ban based on such a broad approach that includes the studies on displays, studies on traditional advertising and psychological theories about consumer behaviour.l'o

272. The overall conclusion in the SIRUS 2010-reoort reads:ttt

"7.1 Answers to the questions posed in the report (i) Con a disploy ban be expected to affect the behoviour of youth in the form of the number of users and/or the totol consumption in this target group? Yes, it is highly probable that it will, but it is difficult to estimate the precise magnitude of the effect.

(ii) Con a disploy ban be expected to influence individuals who have quit or are considering quitting using tobocco products? Yes, it is highly probable that it will, but it is difficult with the available methods to establish the precise magnitude of the effect.

(iii) Con a disploy ban be expected to hove an effect in the long term on the number of users ond/or totol consumption of tobacco products, for example by inftuencing ottitudes? There is no evidence that a display ban will have an immediate effect on tobacco sales, but it is likely that sales will decline in the long term, especially as a result of the fact that fewer individuals will start smoking and fewer quitters will relapse. A display ban will probably further de-normalise tobacco use and smoking, which in turn may influence the symbolic significance of tobacco products and make them less attractive. The effects of a ban on smoking would probably be mediated through such indirect mechanisms."

r88 Proposition No 18 section 1.2 (on p. 6) with reference to the 2008 SIRUS report, see pp. 8 and 56 of the full text report (in Norwegian, cited in section 3.5 above). To the same effect, see RAND (20f0) p. 192. '"Lund etal,Updatedreportontheknowledgebaseconcerningtheprohibitionontiedispiayoftobacco products, SIRUS 20 December 2010 (SIRUS (2010). The report has been translated into dngiisn by an independent translator in consultation with SIRUS, and is enclosed as Annex No l0 '" SIRUS (2010) p. 15. rn' srRUS izoroi b. r o. THE ATTORNEy cENERAL (CtvtL AFFATRS) Written Observations in Case E-16/'10 Page 57 of 67

273. Hence, SIRUS finds it "highly probable" that the display ban willeffectively reduce tobacco use in the two main target groups; young persons and persons trying to quit or to stay quit from tobacco use (conclusions (i) and (ii)).

274. When it comes to the long term effects (conclusions (iii)), SIRUS first holds that there is no evidence of an immediate effect. This is probably a reference to the aggregated effect on the population as such that comes in addition to the effects in the two mentioned target groups. SIRUS continues by referring to the longer term effect, including that fewer individuals will start and more individuals will succeed in quitting smoking, but also to the denormalising effect that the display ban will probably have, leading to the products becoming less attractive. Such indirect mechanisms will probably increase the effects of the display ban.

275. These findings, in line with the other independent research cited above, clearly call for the conclusion that the display ban is indeed suitable as regards all target groups; young people, quitters and the population in general in the somewhat longer term.

276. The Government finds it appropriate to mention briefly the line of reasoning of SIRUS in reaching these conclusions.

277. The starting point for SIRUS are the findings in the 2O0B report, including the conclusion that there is consensus irrespective of methodical approaches that advertising increases tobacco use. As recalled, it was in the 2008 report concluded that the display of products works along similar lines as traditional advertising,'e2

278. All relevant research studies from 2008-2010 are then assessed, starting by a systematic review from 20091s3, and continuing with the ten relevant single studies published in scientific journals.tto The studies are further discussed in section 6 with the following conclusion (emphasis added):les

"The moiority of the most relevont studies hove been published in scientific journols. The overall impression given by the outhors' conclusions in recent studies is thot point-of-sate tobocco disploys moke it more difficult for odult smokers to quit. stimulote impulse Purchosinq and increase the risk thot vouna people will stort smokina. A further conclusion is thot the orguments ogainst a ban are based on misconceptions ond not supported by the literoture. The studies also show thot mony smokers would support a ban on point-of-sole displays."

279. lt is also noted that two studies from lreland do not find statistically significant changes in the overall tobacco sales in the population as such.1e6 In this respect, it must be noted that overall tobacco sales is a very general criterion that will not be particularly suitable to measure effects, see section 6.4.6 below. In addition, it is important to recall that a "significant" effect within research is one "where there is a more than 95% certainty that the association is true and not due to random variation."lsT This level of probability is clearly not the one relevant in a legal analysis, see e.g. section 6.3 above.

'" SIRUS (2010) pp.4-5 with reference to SIRUS (2008). '" SIRUS (2010) p. 6 (ref. Edwards (2009) concluding that the frndings justif a display ban. '" SIRUS (2010) p. 7 on the selection process, and pp. 7-10 with information on the ten scientific studies. '" STRUS (2olo) p. ta. ''" SIRUS (20 l0) p. 14 with reference to McNeill et al andQuinn et a/, commented on p. 9. '"'SIRUS (2010) p.7. ]r.|E ATTORNEy GENERAL (CtVtL AFFATRS) Written Observations in Case E-16/10 Page 58 of67

280. There are still few studies on display bans concretely. Nevertheless, the portfolio of studies as a whole clearly indicates that the display of products directly or indirectly triggers tobacco use. The results of the studies published since 2008 have thus strengthened the conclusions in the 2008 SIRUS report."'

281. SIRUS also provides extensive comments and analysis of methodological aSiproaches. As held above, it is strongly recommended to have a broad approach that includes the consistent findings that advertising effectively increases tobacco sales. Conversely, the report holds that using the proportion of smokers in the general population is a too crude and general criterion for establishing whether the display ban will have an effect within the target groups. These comments regarding methods relate inter olioto the Padilla report relied upon bythe Plaintifl and are described further in section 6.4.6 just below.

6.4.6 The approach by the Plointiff and the tobocco industry in general

282. The tobacco industry in general and the Plaintiff in the present case in particular contest the suitability of display bans and argue primarily that such bans have not proven to be effective. lt is claimed that the effect of display bans will only be reduced competition between different tobacco brands and not reduced sales within the target groups.

283. The allegation that a display ban will only affect intra-brand competition is a traditional argument put forward by the tobacco industry that is contradicted by extensive advertising research clearly demonstrating that advertising bans will reduce tobacco use, cited above. Reference is also made to the following statement by the European Commission (references omitted):1se

"According to the tobocco industry, the oim of odvertising is simply to persuode smokers to chonge bronds, ond as such enhonces the competition between the various products on the morket. Any form of odvertising by definition seeks to increose the targeted product's shore of the market. However, different studies show thot smokers ore very loyol to their tobocco brond and that cigarettes ore omong the products which hove the highest brand loyolty".

284. Nothing indicates that the display ban will have different effects than bans on traditional advertising when it comes to this issue. Indeed, SIRUS also evaluates new studies related to brand switching. lt is concluded in section 7 that the findings on this point are "inconsistent, but the main impression is that smokers have high brand loyalty and that only a small segment would be influenced" by the display ban.too Hence, the basis for a conclusion that a display ban will alter competition between brands is weaker than the conclusion that a display ban will reduce tobacco use.

285. When it comes to the allegation that the display ban does not reduce the use of tobacco, two studies are mentioned in the reference for an advisory opinion; a report made by Padilla financed by Philip Morris201, and a student report in Norwegian from GrOnnevet.2o' Neither of these documents should have any bearing on the conclusion of suitability.

'ot srRUS (2oro) p. 9. tne CoMqz001) 283 final, p. t0 (section 7.4). too SIRUS (2010) p. 14. The relevant studies are Carter et al (2009) and Wakefield (2006), commented on pp 8 an 10, respectively. 'o' Padilla, The effectiveness of display bans: the case of lceland(LECG 2010). """ Crannevet, Unikling i roykevaner som folge av forbud mot synlig oppstilling av tobakksvarer, delivered at Norges Handelshoyskole in 2007. T*tE ATTORNEy GENERAL (CtvtL AFFATRS) Written Observations in Case E-16/10 Page 59 of67

286. First, it seems appropriate to remind the EFTA Court on the broad array of dubious strategies used by the tobacco industry. As introductory remarks to the Guidelines to Article 5(3) of the WHO Framework Convention, the parties to the Convention have made the following statement (by consensus):'o'

"1-i-. The broad arroy of strategies and tactics used by the tobacco industry to interfere with the setting ond implementing of tobocco control meosures, such as those thot parties to the Convention are required to implement, is documented by a vast body of evidence. The meosures recommended in these guidelines oim ot protecting ogoinst interference not only by the tobocco industry but also, as oppropriote, by organizations ond individuals thot work to further the interests of the tobacco industry."

287. A more detailed and highly critical assessment is provided in the WHO 2009 Global Tobacco Epidemic report, stating the following (references omitted, emphasis added):20a

"The tobocco industry has q history of creatino the appeoronce of scientific controversv in an ottempt to counter initiotives intended to restrict tobacco use. However, the ultimote gool of these types of industry-backed initiatives is to maintoin the sociol acceptobility of smoking and prevent odoption of meoningful smoke-free policies in pubtic places ond in workploces.(...) Much of the impetus for discrediting scientific studies of the heolth effects of second-hand tobacco smoke comes from the tobocco industry, which develaps and publicizes its own biosed reseorch to minimize the hormful effects of secondhand tobocco smoke becouse it feors thot restrictions on smoking will reduce soles ond profits. The tobocco industry has olso resorted to attacks on reseorchers studying the effects of second-hand tobocco smoke by criticizing their motives or quolifications, even while acknowtedging internolly the validity of their research findings.

Reseorchers funded bv or affilioted with the tobocco industrv are neorlv 100 times more likelv than independent reseorchers to conclude thot second-hond tobocco smoke is not harmful to health. Much of the reseorch funded by the tobocco industry is not published in peer- reviewed medical iournols, is of poor scientific quality, ond should not be used in scientific, legol or policy settings unless its quality hos been independently assessed."

288. Hence, research funded by the tobacco industry should be evaluated very critically, in particularly in light of the finding that these researchers are "nearly l-00 times more likely"to conclude in line with the views of the tobacco industry (in cosu concerning the effects of second-hand smoking).

289. The two reports mentioned by the Plaintiff do not seem to have been subject to external peer- review,'ot and they should therefore be assessed more thoroughly. Both reports use an econometric method trying to establish trends in smoking prevalence in the population as a whole or among young smokers.'ou This method is criticized for having statistical limitations.2oT It is held using the general smoking prevalence or the prevalence of smokers within one large group as an outcome measure is too general and crude to be reliable. For instance, if the

203 Guidelines to Article 5(3) point I l, Durban 2008, found in the same document as the Guidelines to Article 13. cited section 4.4 above and enclosed as Annex No 9, at p. 21. 'oo wHo (2009)p.32. "'sIRUS (2olo) p. lo. "o SIRUS (2010) pp. 10-l I (in general), pp. l1-12 (the Padilla report) and pp. l2-13 (the Grsnnevet report). '"' RAND (2010) p. 194 concerning the Padilla report. THE ATTORNEY GENERAL (CIVIL AFFAIRS) Written Observations in Case E-16/10 Page 60 of 67

proportion of smokers in general is used to measure the effect of an instrument that (in the short term) is only or primarily expected to influence a smaller segment of smokers, even large effects in this smaller target group will not be registered because they may be concealed by smaller changes in the large remaining segment of smokers.'o'

290. When it comes to the Padilla report, several other critical comments are also forwarded. The RAND report emphasises that the comparison of the developments in lceland (with a display ban) with those in Norway and Sweden (without display bans) suffer from "obvious shortcomings and limitations, which are not made explicitly in this paper"2os. The SIRUS report concludes in a similar manner, demonstrating several methodological weaknesses.tto Among these is the use of statistical significance. Some of the analyses in the Padilla report seem to show that the display ban may have an effect, but this seems to be dismissed because the association is not scientifically significant (95% certainty). SIRUS refers as an example to a table in the Padilla report indicating from 60% to 80% certainty that the display ban may indeed have had an effect, a finding that seems to be used by Padilla as an argument agoinst the suitability of the display ban.ttt

29I. The Gr0nnevet report is, as mentioned, a student paper that according to SIRUS is clearly insufficient scientifically speaking. SIRUS holds, inter olio, that:"t

"Gr4nnevet chose an outcome meosure thot was too crude, mode very few observations, did not correct for other important chonges in the some time period ond did not test whether the model ond the dato sotisfied the conditions on which his conclusions depended."

292. The Plaintiff also contests the denormalising effect of tobacco use. In this regard, it is sufficient to recall that the attitude changing effects of advertising and display of products are well recognized. A ban on advertising and display of products may gradually change attitudes so that people realize that tobacco products are different than normal products. Hence, denormalisation of tobacco use will have an extra effect on the reduction of tobacco use in the longer term. This is further set out e.g. in sections 6.2 and 6.4.5 above

293. The Plaintiff furthermore argues that the display ban will increase price competition and thereby lead to cheaper products and hence increased sales numbers. The Government notes, first, that it is difficult to see how possible price changes could raise doubts about the legality of quite a different type of instrument as the display ban represents. Moreover, it may rather be, as argued in the RAND study, that a display ban will lead to increased prices due to increased costs for the retail outlets, and that this will have an extra effect on the reduction of tobacco use."' lt is also recalled that 80% of the tobacco prices in Norway consists of taxes, limiting the scope for price-based competition.2la

294. The Plaintiff has also indicated that the display ban will have reduced (or no) effect because it makes it difficult to introduce new and "healthie/' products. This argument cannot be relevant under the proportionality test as long as the industry is legally precluded from arguing that a tobacco product is healthier than other tobacco products. Such arguments are regarded as tot SIRUS (2oro) p. r r. 'on RAND (2oro) p. l9a ''o STRUS (2010) p. l2 and pp.26-28. '" SIRUS (20t0) p.27. t't sIRUS (2olo) p. 12. ''' RAND (2001) p. xxi. tto See section 2.3.3 above. THE ATTORNEY GENERAL (CtvtL AFFATRS) Written Observations in Case E-16/10 Page 61 of 67

misleading and incompatible with the Tobacco Product Directive, see section 4.2.1 above. in particular.

295. Finally, the Plaintiff seems to argue that the display ban, as an alternative point of view, at least is disproportionate for adult smokers who will not receive information on the available products. This may be seen as an argument to the effect that the display ban will not be suitable for adult smokers. As held above, however, the display ban is directed at young people as well as adults, including adult smokers. The research substantiates that the ban will be effective also for adults, in particular those trying to quit smoking or who have recently quitted. lt cannot therefore, in the Government's opinion, be questioned that the ban is suitable even for adults. lt is also notable that tobacco products are sold in outlets without age limit for entering the premises. lf the products should be visible when an adult customer is at the front of the queue by the counter, it would also be visible to the youth standing behind him. Also for that reason should the argument from the Plaintiff be rejected.

6.4.7 Concluding remorks on suitability

296. Based on the above, the Government submits that the display ban must be considered suitable. The relevant test must be whether it is reasonable to assume or expect that the display ban will have effect on the use of tobacco products in the target groups; young people in particular, but also adult tobacco users trying to quit or to stay quit as well as the population as such in a somewhat longer term. Relevant research summarized in EU-documents, WHO- documents, in the RAND report and the in SIRUS reports substantiates that a display ban will have effect in relation to all these target groups. The arguments presented by the Plaintiff do not alter this conclusion.

297. Hence, it must be concluded that a display ban, as the one in the Norwegian Tobacco Control Act, is a suitable instrument. Should the EFTA Court not find sufficient basis for such a conclusion, it should suffice to guide the national court on the relevant test of suitability, namely whether it is reasonable to assume that the display ban will have effect in the short or longer term.

6.5 Necessity

6.5.L The necessity test - introduction

298. lf a national restriction is based on legitimate public objectives and suitable to achieve these aims, the final test under EEA law in a case like the present one is whether the measure is also "necessary", in the sense that the same objectives cannot be achieved equally effectively with less restrictive means, see section 6.1 above.

299. These basic elements of the necessity test have been laid down numerous times by the EFTA Court and the ECJ. The more concrete clarification of this test applied by the same courts, however, differs depending on the particularities of the sector and the case concerned. The same goes for the level and intensity of the judicial review of the necessity of a restriction. As set out in section 6.3, the discretion of the EU and EEA States to determine the level of protection in the health sector and the way in which this level is to be achieved, imply that the Court should take a cautious approach when reviewing the necessity of measures in this sphere. rHE ATTORNEY GENERAL (CIVIL AFFAIRS) Written Observations in Case E-16/10 Page 62 of 67

300. The Pedicelcase concerning the Norwegian ban on alcohol advertising is an example of such a careful approach acknowledging the national discretion in the health sector. This case is particularly pertinent to the instant case, since the display ban is targeted at the advertising effect of visible tobacco products. Indeed, it has been shown above that it is particularly challenging to demonstrate with accuracy the effect (or expected effect) of advertising bans and similar measures. The same goes for the assessment of such advertising bans compared with alternative regulations in this sphere. ln Pedicet the Court stated that it must be "apparent" that less restrictive means exist, and left this assessment to the national court."s The same must apply to the present case.

6.5.2 Burden of proof etc.

30L. As already noted in section 6.3 above, the principle that the national authorities have the onus of proving the proportionality of a restriction is no more than a starting point. As regards the necessity test, the nationalauthorities' burden of proof is subject to severalqualifications.

302. First, as pointed out bythe ECJ in Case C-L\O/OS,Commissionv. ttaly, the burden of proof does not imply that national authorities must provide positive proof that no other conceivable measure could be equally effective:21'

"66 ln the present cose, the ltolian Repubtic contends, without being contradicted on this point by the Commission, thot the circulation of a combination composed of o motorcycle ond a troiler is a donger to road safety. Whilst it is true thot it is for a Member State which invokes on imperotive requirement as justification for the hindrance to free movement of goods to demonstrote thot its rules ore dppropriate and necessary to ottoin the tegitimate objective being pursued, thot burden of proof cannot be so extensive as to require the Member State to prove, positively, that no other conceivable meosure could enoble that objective to be attoined under the some conditions (see, by analogy, Cqse C-1"57/94 Commission v Netherlonds P.9971 ECR I-5699, porograph 58)."

303. In this context, the ECJ emphasised that the Member States' need for achieving legitimate objectives through general and simple rules must be taken into account:217 "Although it is possible, in the present cose, to envisage that measures other thon the prohibition laid down in Article 56 of the Highwoy Code could guorontee o certain tevel of rood sofety for the circulation of a combination composed of o motorcycle and o troiler, such os those mentioned in point J.70 of the Advocate General's Opinion, the,foct remains thot Member Stofes connot be denied the possibility of attoining an objective such os rood safety by the introduction of general and simple rules which will be eosily understood ond opplied by drivers and eosily monoged and supervised by the competent authorities."

304. Second,asjustheldwithreferencetoPedicel,wherethenational authoritieshaveshownthat a measure in the sector of public health is suitable, it must be "apparent" that less restrictive measures exist, a test equally applicable to the case at hand:

"The dnswer to the third question must therefore be thot a prohibition ogoinst the odvertising of alcoholic beverages such os the one ot issue moy be justified on grounds of the protection

2t.s Pedicel, paras. 57 and 6l. ''o Case C-|10/05,Commission v. Italy,para. 66. 217 Commission v ltaly, para. 67 THE ATTORNEy GENERAL (Ctvtt AFFATRS) Written Observations in Case E-16/10 Page 63 of 67

of public health, unless it is apporent that, in the circumstonces of low and of foct which choracterise the situation in the EEA Controcting Porty concerned, the protection of public health ogoinst the hormful effects of alcohol can be secured by meosures having tess effect on i ntro-E EA tro de."218

305. The Plaintiff submits that the Norwegian Supreme Court in Pedicel2le applies the above- mentioned principle from the EFTA Court to the effect that the burden of proof for the necessity of a measure shall lie with the private party. The Government disagrees with this interpretation of the judgment and cannot see that the Supreme Court relies on principles which depart from EEA law.

306. The obligation to adduce proof for a certain submission will typically shift between the parties to a dispute. As noted by Kriimer, "[t]he more substantiated the arguments from one side are, the more detailed those from the other side have to be."220 lt is only at the end of this process that the courts are faced with the question of the objective burden of proof. ln T-Mobile Netherlonds AG Kokott gives a description of this process in the context of Article 81 (1), which seems also pertinent to the case at hand (emphasis added):221

'89. lt is not least those charocteristics of the evidence tendered in proof of infringements of competition rules which imply that it must be open to the authority or privote porty on whom the burden of proof lies to drow certqin conclusions on the bosis of common experience. Thereupon it is for the opposina porty * usuolly, the undertoking alleged to hove infringed the competition rules - to controdict those prima facie conclusions drawn on the basis of common experience, adducinq coqent evidence to the contrarv, failing which such conclusions are odequote to discharge the burden of proof. In other words, there is an interplav of the respective burdens of adducino proof prior to considerotion of the obiective burden of proof."

307. ln its judgment, the Supreme Court takes this interplay of the respective burdens of adducing proof"'as its point of departure (paragraphs 51-52). In the following paragraph, the Court points out that in cases where the state determines the level of protection, and the national authorities have demonstrated that the measure is suitable and prima focio necessary, the other party must show that an alternative measure would nevertheless be equally effective when that measure only differs from the impugned measure in that it is less comprehensive.223 In the view of the Government, it is natural to assume that, in the absence of specific evidence to the contrary, a less comprehensive measure of a similar nature would indeed be less effective. Hence, it is logical that the burden of adducing proof for such an assertion should shift to the other party. lt is difficult to see how this line of reasoning could be incompatible with EEA law.

''8 Pedicel. oara. 6l t'n Judgment 24 June2009, HR2009-1319-A, Rt.20098 p. 839, cited in section 3.2 infine. tto Kramer, EC Environmental Lmu (2007) p. I14. To the same effect, see Jans, Proportionality Revisited,Legal Issues of Economic Integration2T (3):239-265 (2000) tt' p.259. Opinion in Case C-8/08 T-Mobile Netherlands I-4529, para. 89. 222 t200i)ECR Indeed, the term bevisforingsplikt fturden of aiduciig proofl is ut"i in paras. 53 and 62, and not bevisbyrde (burden of proofl. "' In the Pedicel case; whether a more limited ban on advertising would be equally effective as a more general ban on advertising. See alsojust below and above in 6.4 on the significance ofa comprehensive ban on advertising to ensure the effectiveness oftobacco control measures. THE ATTORNEY GENERAL (CIVIL AFFAIRS) Written Observations in Case E-16/10 Page 64 of67

6.5.3 Alternatives to the display bon

308. The Plaintiff submits that the objective of the display ban could be equally well attained through less restrictive measures, such as a licensing system for tobacco retailers, stricter enforcement of the age limits for purchasing tobacco, a ban on straw man trade, mass media campaigns, or regulations of the maximum space for displaying tobacco products and/or limited visibility of such products.

309' The Government holds that other equally efficient measures do not exist. None of the alternative measures referred to by the Plaintiff would, in the same way as the display ban, close the last gap in the ban on tobacco advertising, or contribute to denormalise tobacco use. In addition, some of the alternative measures would not reach all target groups, and/or must be seen as supplements, not alternatives to the display ban.

310' At the outset, it is important to note that the purpose of the display ban is to close the last gap in the ban on tobacco advertising by removing the visibility of the tobacco products. This is based on the experience and research that partial bans on tobacco advertising have had limited effect since the tobacco industry transfers its resources to sectors where advertising is not prohibited, see section 6.4 above. This is exemplified by the wHO report on the Global Tobacco Epidemic, also cited above, holding that a complete ban on all advertising is needed in order to provide effective protection from the tobacco industry's marketing tactics (references omitted, emphasis added):224

"Tobocco odvertising, promotion ond sponsorship con make smoking more socially occeptable, impede efforts to educote people obout the hazards of tobocco use, ond strengthen the tobocco industry's influence over media, sporting ond entertoinment businesses. A comprehensive bon on all advertising, promotion ond sponsorship protects people from industry marketing tactics and could decrease tobocco consumption by about 7%, independent of other tobocco control interventions. Complete bans block the industrv's obilitv to continue marketina to young people who hove not yet storted to use tobacco, ond to odult tobacco users who want to quit. Portiol bans hove little or no effect: if advertising is prohibited in o particular medium, the tobdcca industry merely redirects expenditures to ploces where advertising is permitted.,,

311. In the instant case, it is evident that only the display ban can close the last gap in a comprehensive ban on tobacco advertising, thereby reinforcing the effect of existing measures' The Government submits that, for this reason alone, the disflay ban must be considered necessary.

312. Moreover, as set out in section 3.4 above, it must be assumed that the display ban will contribute to changing people's attitude towards tobacco, in the sense that it will help denormalise the use of tobacco. None of the alternative measures referred to by the plaintiff would have such an indirect effect. Hence, they are not suitable for achieving parts of the objective behind the display ban.

313. Measures such as an authorisation system for tobacco retailers, stricter enforcement of the age limits for purchasing tobacco and a ban on straw man trade only targets young people. As noted in section 3.4, the aim of the display ban is not only to reduce smoking uptake amongst youngsters. The ban is also directed at persons who are considering or trying to quit smoking

"o wHo (2009) p. 52. ;THE ATTORNEY GENERAL (CIVIL AFFAIRS) Written Observations in Case E-16/10 Page 65 of 67

and persons who have recently quit smoking, as well as the population as a whole in the somewhat longer term. Hence, these measures would only be suitable to achieve the objectives of the display ban in relation to one of the target groups (young people), and would therefore also be less effective than the display ban.

314. Some of the alternative measures, such as stricter enforcement of age limits and mass media campaigns, are supplements, not alternatives to the display ban, see section 2.3.L above on the need for a comprehensive and diversified tobacco control policy. These measures are all part of the existing tobacco control policy in Norway, see also section 2.3 above. lt is therefore for instance not a question of choosing either age control or a display ban, but whether age control and the display ban is more effective than age control alone. Certainly, the joint effect of severalmeasures willlead to a higher protection of the public health objectives.

315. A possible licensing system for the sale of tobacco is presently not a part of the Norwegian policy, but it is under consideration whether to introduce such a supplementing measure. Again, this measure will not be suitable to ensure all elements pursued by the present display ban regulation. lt will not address the desired signal affect, and it can hardly be regarded as equally effective, neither for young people nor for adults trying to quit using tobacco."t In addition, the Directorate of Health has indicated that a possible licensing system should reduce the number of retail outlets considerably to be effective. As held in section 2.3 above, a possible proposal to this effect has met fierce opposition from the industry.

316. Measures which are similarto the display ban, only less comprehensive, such as regulations of the maximum space for displaying tobacco products and/or limited visibility of such products, must be assumed to be less effective, see the analysis above demonstrating that advertising bans will be more efficient the stricter they are. The RAND report discusses this question in relation to a display ban concretely and concludes, not surprisingly, that a total ban on displaying tobacco products will be more effective than partial bans (emphaqis added):"6

"The options ovailable to DG SANCO occording to its proposol with regord to such restrictions or bons are os follows: L. Ban promotion (sheers, billboords, big packets, discount bonners, etc.) at retailoutlets. 2. Restrict the displov of products ot PoS 3. Ban the displov of products ot PoS. While it is not possible to quantify the likely heolth impoct of each of these meosures, it follows from the evidence thot the stricter the bon or restrictions, the stronaer the positive health impact on consumers is likelv to be. (...) It follows from this evidence thot promotions ond displays at retoil stores influence purchasing decisions ond moy have on impoct on smoking uptoke by youths. Therefore, it moy be envisaged thot the stronqest of the three meosures presented obove, nomelv bonninq the disnlov of products at the PoS would have the stronqest positive impact on both youths and adult bv removinq cues to purchase tobocco products."

317. An additional argument substantiating the need for a comprehensive display ban rather than regulation of the display of products is the addictiveness of tobacco. As these products are

t" Unless only premises with age control are licensed to sell tobacco products. "o RAND (2010) p. 195. {THE ATTORNEY cENERAL (CtVtL AFFATRS) Written Observations in Case E-16/10 Page 66 of67

particularly addictive,227 even a limited advertising effect may have a larger effect than a similar advertising effect for other products.trt

318' The Government questions also whether some of the alternative measures would be less restrictive' is lt for instance difficult to see that a licensing system as described above would be less restrictive to the tobacco trade than the display ban.

6.5.4 Concluding remorks on necessity

319' Based on the above, the Government submits that the display ban must be considered necessary' Other less restrictive measures would not be as effective in achieving the objective pursued. They would not close the gap in the ban on tobacco advertising, contribute to denormalise tobacco use, or reach all target groups. Similar less comprehensive measures must be assumed to be less effective, and some of the alternative measures are supplements, not alternatives to the display ban.

320' Consequently, no alternative measure will achieve the aims pursued equally effectively. lt should in any event be recalled that it is for the national court to apply this necessity test, i.e whether it is apparent that, in the circumstances of law and of fact which characterize the situation in the state concerned, the protection of public health against the harmful effects of tobacco use can be secured equally effectively by measures having less effect on intra-EEA trade.

7 ANSWERS TO THE QUESTTONS

321'. Based on the foregoing, the Norwegian Government respectfully suggests that the questions referred in case E-L6ho should be answered in the following way:

1. A ban of the disploy of tobocco products in retail outlets such os the one laid down in Section 5 of the Norwegion Tobocco Control Act does not constitute o meosure hoving equivalent effect to o quantitotive restriction on the free movement of goods under Article 1i_ EEA.

Assuming 2' that the national court concludes thot the disptay ban folls under the scope of Article 77 EEA, it is iustified on grounds of pubtic heotth unless it is apparent that, in the circumstonces of law and of fact which chorocterize the situation in the EEA Controcting Party concerned, the protection of pubtic heolth agoinst the hormful effects of tobocco use con be secured equolty effectively by meosures hoving less effect on intro-EEA trode.

Oslo, 19 June 2011 THE ATTORNEY GENERAL (CrVtL AFFATRS) 4-//Qf) lda Thue Advocate, ag Advocate, agent t" See section 2.2 above. 228 This seems acknowledged by the Commission in COM(2001) 283 final, p. l0 (secrion 7.4). sHE ATTORNEy GENERAL (CtvtL AFFATRS) Written Observations in Case E-16/10 Page 67 of67

LIST OF ANNEXES

1.. Act 9 March 1973 No 14 relating to Prevention of the Harmful Effects of Tobacco (the Tobacco Control Act)

2. RAND Europe, Assessing the tmpocts of Revising the Tobocco product Directive, September 2010 ( relevant sections)

3. WHO, Report on the Globol Tobocco Epidemic 2009. lmplementing smoke-free environments (relevant sections)

4. Council Recommendation 2003/54/Ec of 2 December2oo2 on the prevention of smoking and on initiatives to improve tobacco control, OJ 2003 L22 p.37

5, Ot.prp. nr. L8 (2008-2009) Om lov om endringer i lov 9. mars 1973 nr. L4 om vern mot tobakksskader (Forbud mot synlig oppstilling av tobakksvarer og roykeutstyr) 6. Lund & Rise, Knowledge bose relating to the bitt proposing o ban on visible displays of tobacco products, SIRUS skrifter t/2008, English summary

European Commission , Possible revision of the Tobocco Product Directive 2OOI/37 /EC, DG sANCO 2010

8. The wHo Framework convention on Tobacco control, Geneva 21 May 2003

9. Guidelines for implementation of Article L3 (Tobacco advertising, promotion and sponsorship), Conference of the parties to the WHO Framework Convention on Tobacco Control, third session, Durban, South Africa,17-22 November 2008, decisions and ancillary documents (relevant parts)

1n Lund et al, Updoted report on the knowledge base concerning the prohibition on the disptoy of tobacco products, SIRUS 20 Decembe r 2OtO po ti Registered at the EFTA Court under "!'-'i!lrb

MINISTRY FOR FOREIGN AFFAIRS OF HEL78574 FINLAND

18.1.2011

To the EFTA Court

WRITTEN OBSERVATIONS OF THE FINNISH GOVERNMENT IN CASE F.-I6I1O, PhiIiP Morris Norway AS v Staten v/llelse- og omsorgsdepartementet

WRITTEN OBSERVATIONS

submitted by the FINNISH GOVERNMENT in accordance with Article 20 of the

Statute of the EFTA Court

In case E-16/10

Philip Morris Norway AS

against

Staten vlflelse- og omsorgsdepartementet

In accordance with Article 33 paragraph 2 of the Rules of Procedure of the EFTA Court Finland agrees that service is to be effected on it by fax to number +358 9 1605 6540.

Postal address of the Asent:

Ministry for Foreign Affairs of Finland oIK-30 P.O.Box 417 FI-00023 Government

P.O.Box 176 Laivastokatu 22 FI-OOO23 GOVERNMENT FINLAND Copy certified by J Aia ?ro/^L4^, 2(16)

1. Oslo District Court has requested the EFTA Court to give an advisory opinion pursuant to Article 34 of the Agreement between the EFTA States on the Establishment

of a Surveillance authority and a Court of Justice on the interpretation of Article 1 1 of the Agreement on the European Economic Area (hereinafter "the EEA Agreement").

2. The national court has decided to refer the following questions to the EFTA Court for an advisory opinion.

3. First, the national court seeks to ascertain whether Article 1 1 of the EEA Agreement shall be understood to mean that a general prohibition against the visible display of tobacco products constitutes a measure having equivalent effect to a quantitative restriction on the free movement of goods.

4. Second, assuming there is a restriction, the national court asks which criteria would be

decisive to determine whether a display prohibition, based on the objective of reduced

tobacco use by the public in general and especially amongst young people, would be suitable and necessary having regard to public health.

5. The questions referred to the EFTA Court relate to the prohibition against visible display of tobacco products at retail outlets that came into force in Norway on I January 2010. A similar prohibition has been adopted also in some other EEA States including Finland.

Relevant sources of EEA law and WIIO law

EEA Agreement

Articles 1l and 13 of the EEA Agreement state the following:

Article 1l

Quantitative restri.ctions on imports and all measures having equivalent effect shall be prohibited between the Contro.cting Parties. 3(16) Article 13

The provisions of Articles Il and 12 shall not preclude prohibitions or restrictions on imports, exports or goods in transit justified on grounds of public morality, public

policy or public security; the protection of health and life of humans, animals or plants; the protection of national treasures possessing artistic, historic or archaeological vahte; or the protection of industrial and commercial property. Such prohibitions or restrictions shall not, however, constitute a means of arbitrary discrimination or a

disguised restriction on trade between the Contracting Parties.

The WHO Framework Convention on Tobacco Control

7. The WHO Framework Convention on Tobacco Control (hereinafter "the FCTC Con- vention") was adopted by the World Health Assembly on 21 May 2003 and entered in- to force on27 February 2005. The Convention currently has IT2Parties. Most of the

EEA States have ratified the Convention. Also the EU has acceded to Convention as an organisation.

8. Article 13 of the FCTC Convention contains provisions on tobacco advertising, pro-

motion and sponsorship.

9. According to Article 1 (c) "tobacco advertising and promotion" means, for the purpos-

es of the FCTC Convention.

"any form of commercial communication, recommendation or action with the aim, effect or likely ffict of promoting a tobacco produce or tobacco use either directly or indirectly".

10. According to Article 13 (l) Parties recognize that a comprehensive ban on advertising, promotion and sponsorship would reduce the consumption of tobacco products. It is

stated in Article 13 (2) that each Party shall, in accordance with its constitution or constitutional principles undertake a comprehensive ban of all tobacco advertising, pro-

motion and sponsorship. A Party that is not in a position to undertake a comprehensive

ban due to its constitution or constitutional principles shall, according to Article 13 (3), apply restrictions on all tobacco advertising, promotion and sponsorship. 4(16) 11. The minimum obligations pursuant to the Convention are established in Article 13 (4). According to Article 13 (5) Parties are encouraged to implement measures beyond

these obligations.

12. The Conference of the Parties to the FCTC Convention has, in accordance of Article 7 of the Convention, adopted guidelines for implementation of the provisions of Article

13.

13. As regards retail sale and display, the guidelines state the following:

"Display of tobacco products at points of sale in itself constitutes advertising and promotion. Display of prodttcts is a key means of promoting tobacco products and

tobacco use, inchtding by stimulating impulse purchases of tobacco products, giving the impression that tobacco tne is socially acceptable and making it harder for tobacco users to quit. Young people are particularly vulnerable to the promotional fficts of product display

To ensure that points of sale of tobacco products do not have any promotional elements, Parties should introduce a total ban on any display and on the visibility of tobacco products at points of sale, including fixed retail outlets and street vendors. Only the textual listing of products and their prices, without any promotional elements, would be allowed. As for all aspects of Article 13 of the Convention, the ban should also apply in ferries, airplanes, ports and airports."

14. Accordingly, the following recommendation is included in the guidelines:

"Reeommendation

Display and visibility of tobacco products at points of sale constitutes advertising and promotion and should therefore be banned."

On the prohibition against the visible display of tobacco products

15. As stated in the reference for an advisory opinion, a prohibition against the visible display of tobacco products has, in addition to Norway, been adopted also in other EEA States, including Iceland, the UK, Ireland and Finland. 5(16) 16. In Finland the ban was adopted on 20 August 2010 and it will enter into force on I January 2012. The provisions establishing the display ban are included in Section 8 a

of the Tobacco Act, according to which:

Section I a (20.8.2010/698)

Display of tobacco products and their trademarls in retail sale facilities for tobacco products is forbidden.

What is provided in paragraph I does not apply to a sales point mainly selling tobacco products and smoking accessories that is provided with a separate en- trance and whose tobacco products cannot be seen by the public from outside the sales point.

Wat is provided in paragraph I does not apply to the sales of tobacco products on board a vessel used in international maritime traffic.

The retailer of tobacco products may show purcltasers of tobacco products at

their request a printed catalogue presenting packets of the tobacco products on sale in the retail sale facilities. At the purchaser's request the retailer may also supply to the purchaser a printed list of the tobacco products and their prices. Further provisions on the content and layout of the catalogue and list are laid

down by deuee of the Ministry of Social Affairs and Health'

17. The main purpose of the Finnish Tobacco Act, enacted in 1976, is to reduce smoking

and related health detriments. However, smoking has not decreased as intended by the objectives of the Act. Therefore, Finland regarded it as necessary to intensiff the measures laid down in the Tobacco Act by adopting a new Act in 2010. It was consid-

ered particularly important to provide for more efficient measures in order to reduce the opportunities for children and young people to start smoking, and in order to restrict smoking in their growth environments.

18. The prohibition of visible display of tobacco products is one of the most important

measures under the new Act, which prohibits the display of tobacco products and their

trade marks in retail sale. The purpose of the prohibition is to restrict the marketing of 6(16) tobacco products especially in retail outlets operating in the everyday environments of children and young people. Thus, the prohibition is intended to contribute to reducing

smoking and related health detriments.

19. Advertising of tobacco products as well as other sales promotion activities targeted at

consumers, have been prohibited in Finland since 1977.r

20. After the entry into force of the advertising prohibition, the design of tobacco product packages and their visible display in retail outlets have become significant methods of marketing.

2t. Various studies have shown that if tobacco products are kept visible in retail outlets, they attract customers' attention and also raise desire to buy such products.2 It is generally known that the visible display of any product is intended to make it sell better. Advertising, other sales promotion and sponsoring of tobacco products, as any other

products, increase their consumption, whereas a comprehensive prohibition of adver-

tising, other sales promotion and sponsoring of these products decrease the consumption.3

22. The packages of tobacco products are advertisements as such. Although the original

purpose of the tobacco product package was to protect the product, it has become an increasingly important medium of communication. The size, form, material and col-

ours of the package and the trademarks and figures appearing on it are designed with a

view to giving consumers marketing stimuli that are known to influence their purchasing behaviour.

23. In addition, the advertising is boosted by various means by the display of the products.

Tobacco products are for example, as a rule, placed at the cash desks of retail outlets

where they are usually placed at eyes height in a route which customers are compelled to follow, in order to make customers notice the products every time they go to the

cash desk. This increases the possibility of impulse purchases of these products.

t Intgg4 the prohibition was extended to indirect advertising and all sales promotion. 'Wakefield M., Germain D. & Henriksen, L. The effect of retail cigarette pack displays on impulse purchase, Addiction 2007, Vol. 103 2, s. 322-328. o ; US National Cancer Institute, The Role of the Media in Promoting and Reducing Tobacco Use. Tobacco Control Monograph 19, US Department of Health and Human Services, National Institutes of Health, National Cancer Institute, August 2008. 24. The prohibition of display is especialiy intended to protect children and young ;:::1. against the marketing of tobacco products in retail outlets in their everyday environ-

ments.

25. In general, tobacco products are displayed more visibly than other commodities in re-

tail outlets. Such emphasised visibility of these products in children's and young peo-

ple's everyday environments gives them an incorrect picture of the frequency of smoking. The packages of tobacco products and their display make children and young people aware of brands, especially when they are starting smoking or considering it.

26. In general, retailers place in customers'route in outlets not only tobacco products, but

also products intended for children and young people, e.g. sweets, ice cream and com- ics or magazines, which may attract their attention to tobacco products. Placing products attractive to children and young people beside tobacco products makes them aware of tobacco products and paves way for their interest in trying such products. At

the same time, children and young people are given the idea that smoking is normal and acceptable and tobacco products are easily available. Such a message influences

their subconscious and fosters among them positive attitudes towards tobacco products and smoking.o Children or young persons who start smoking choose a tobacco brand which is familiar to them and through which they can identify themselves with e.g. their idols or reference groups or adults taken for their models. Studies show that the more visible tobacco products are kept, the more the risk of starting smoking in-

creases.5

27. The prohibition of display is intended to restrict the visibility of tobacco products in

the everyday environments of both children and young people and adults.

28. For instance, a study conducted by the Finnish National lnstitute for Health and Wel- fare shows that 59 per cent of all smokers in Finland who smoke daily want to stop

o Wuk"fi"ld M., Germain, D., Durkirl S., Henriksen, L. An experimental study of effects on schoolchildren of exposure to point-of-sale cigarette advertising and pack displays. Health Education Research 2006;21(3):338. Tilson Consulting. Restrictions on the display of tobacco products. Prepared for: Smoke-Free Nova Scotia. August 2004, 18- 19. 5 Tho-ron G, Edwards R, Hoek J, Gifford H. Evidence and arguments on tobacco retail displays: Marketing an addictive drug to children? NZ Med J: 2008. Henriksen L., Sctrleicher N., Feighery E. and Fortmann S. A Longitudinal Study of Exposure to Retail Cigarette Advertising and Smoking Initiation, Pediatrics 2010;126;232-238. Paynter J, et al. Point ofsale tobacco displays and smoking amongst 14-15 year olds inNew Zealand: cross sectional study. Tobacco Control Joumal 2009, August 18 (4) 268-274. 8(16) smoking6. Seeing tobacco products continuously reminds them of smoking and thus

hampers or frustrates their decision to stop smoking. The purpose of the prohibition of visible display of tobacco products is to support smokers'decisions to stop smoking.

29. In a study conducted in 2007, more than half of all smokers reported that the visible display of tobacco products made it more difficult for them to stop smoking. The study showed that the display of tobacco products reminds smokers of their existence

and stimulates impulse purchases also among those who have decided to stop smoking

and try to do so.7 The visible display of tobacco products may increase smokers' daily

consumption of these products, hamper their decision to stop smoking and increase the number of impulse purchasers.

Legal assessment

Question I

30. The Finnish Government considers that a general prohibition against the visible display of tobacco products does not constitute a measure having equivalent effect to a quantitative restriction on the free movement of goods within the meaning of Article

11 of the EEA Agreement.

31. According to the settled case-law of the Court of Justice, all trading rules enacted by Member States which are capable of hindering, directly or indirectly, actually or potentially, intra-Community trade are to be considered to be measures having equivalent effect to quantitative restrictions for the purposes of Article 28 EC.8

32. However, the application to products from other Member States of national provisions restricting or prohibiting certain selling arrangements is not such as to constitute such

a hindrance, on condition that those provisions apply to all relevant traders operating

within the national territory and that they affect in the same manner, in law and in fact,

the marketing of domestic products and of those from other Member States. Provided

that those conditions are fulfilled, the application of such rules to the sale of products

from another Member State meeting the requirements laid down by that State is not by

o Helakorpi S., Laitalainen E., Uutela A.. Health Behaviour and Health among the Finnish Adult Populatiort Spring 2009. National Institute for Health and Welfare (THL), Report 712010. Helsinki 2010. 7 Wuk fidd M., Germain D. & Henriksen, L. The effect of retail cigarette pack displays on impulse purchase, Addiction 2007, Vol. 103;2, s.322-328. e(16) nature such as to prevent their access to the market or to impede access any more than

it impedes the access of domestic products.e

33. The Finnish Government considers that the provisions concerning the display ban are

provisions conceming selling arrangements. The application of the display ban does

not, thus, constitute a hindrance to the free movement of goods if two conditions are met. First, the ban has to apply to all relevant traders operating within the national ter-

ritory. Second, it has to affect in the same manner, in law and in fact, the marketing of

domestic products and the selling of those from other EEA States.

34. As regards the first condition, it is clear that the legislation applies to all relevant trad-

ers involved in selling tobacco products.

35. As regards the second condition, the Finnish Government considers that the display

ban appears to affect in the same manner, in law and in fact, the marketing of domestic

products and the selling of those from other EEA States. It is for the national court to

make the final assessment on this question.

36. It is apparent from the decision for reference that the plaintiff in the main proceedings

has referred to the judgment of the Court of Justice in the case C-405198 Gourmet in

support of its application. The case concerned the extensive prohibition on advertising

of alcoholic beverages in force in Sweden. The Court of Justice concluded that in the case of products like alcoholic beverages, the consumption of which is linked to tradi-

tional social practices and to local habits and customs, a prohibition of all advertising

directed at consumers is liable to impede access to the market by products from other

Member States more than it impedes access by domestic products, with which consumers are instantly more familiar. The plaintiff in the main proceedings claims that

the display ban in practice precludes market access of new products from other EEA

states for the benefit of brands which alreadv are established locallv.

37. In the view of the Finnish Government, tobacco products cannot, in general, be considered as products the consumption of which is linked to traditional social practices and to local habits and customs in a similar manner as the consumption of alcoholic

8 Case 8/74 Dassonville [1974] ECR 837, paragraph 5. e Joined Cases C-267/91 and C-268lgl Keck and Mithouard ll993lECR I-6097, paragraphs 16 and 17, Case C-l10/05 Commissionv ltaly 120091, ECR I-00519, paragraph 36 and Case C-531/07 Fachverband der Buch- und Medienwirtschaftv LIBRO Handelsgesellschaft mbH 120091ECR !-03717, paragraph 17. 10(16) beverages according to the judgment in the case Gourmet.ln any case it is apparent from the decision for reference that there is no production of tobacco in Norway and

therefore no domestic products with which consumers could be more familiar with.

38. As regards the market access of new products, the display ban affects the market access of new domestic products in a similar manner as the market access of new

products from other EEA states.

39. It should be noted that, according to the decision for reference, there is a total prohibi-

tion against advertising of tobacco products in force in Norway. Consequently there is no other form of marketing for tobacco products that domestic producers could benefit

from in a more effective manner than producers from other EEA states.10

40. Lastly, the Finnish Govemment submits that the display ban does not imply that

access to the market is prevented. The situation in the present case is, thus, not similar

to the one at hand in Case C-142105 Mickelsson and Roos.In this regard, the Govern-

ment refers to the statements made by the defendant referred to on page 15 of the or-

der for reference.

4r. It is apparent from the foregoing analysis that a general prohibition against the visible

display of tobacco products does not constitute a measure having equivalent effect to a quantitative restriction on the free movement of goods within the meaning of Article

11 of the EEA Agreement.

Question 2

42. Since the Finnish Govemment has proposed that Question I should be answered in the negative, the Government considers that it is not necessary to answer Question 2.

43. In the event that the Court would, however, conclude that a general prohibition against

the visible display of tobacco products does constitute a measure having equivalent effect to a quantitative restriction on the free movement of goods, the Finnish Govem- ment considers that the restriction is none the less justifiable on grounds of protection of health and life of humans under Article 13 of the EEA Agreement. 1 1(16) 44. Measures constituting quantitative restrictions on imports within the meaning of Ar-

ticle 1 I of the EEA Agreement may be justified, inter alia, on the basis of Article 1 3 of

the EEA Agreement, on grounds of protection of the health and life of humans.

45. According to the order for reference, the display ban in force in Norway is based on

the objective of reducing tobacco use amongst the population in general and amongst young people especially.

46. The prevention of smoking and the control of tobacco consumption are important as-

pects of health protection. The Finnish Government considers that the display ban un-

doubtedly reflects health concerns recognised by Article 13 of the EEA Agreement.

47. It is settled case-law of the Court of Justice that the health and life of humans rank

foremost among the assets or interests protected by Article 36 TFEU and it is for the

Member States, within the limits imposed by the Treaty, to decide what degree of pro-

tection they wish to assure.l1

48. In order for public health concerns to be capable ofjustifying an obstacle to trade, the measure must not constitute either a means of arbitrary discrimination or a disguised

restriction on trade between Member States. The measure must also be appropriate for

securing the attainment of the objective pursued and must not go beyond what is ne-

cessary in order to attain it.

49. First, the Finnish Government considers it clear that the public health grounds on which the Norwegian authorities rely have not been diverted from their purpose and used in such a way as to discriminate against goods originating in other Member

States or to protect certain national products indirectly.l2

50. Second, the Finnish Government considers that the display ban is an appropriate measure for securing the attainment of the objective pursued i.e. the protection of the

health and life of humans.

51. The design of tobacco product packages and their visible display in retail outlets have become a significant method of marketing especially in countries such as Norway and

10 Compate.loined cases C-341g5,C-351g5 andC-36195 konsumentombud.smannen (KO) v De Agostini Fdrlag AB and W- Shop i Sverige AB ECR I-03843. tt ll999l Case C-l7O/04 Klas Rosengren and Others v Ritcsdklagaren [2007IECR I-04071, paragraph 39 and the case-law cited. 12(16) Finland, where an extensive advertising prohibition of tobacco products is in force. The packages of tobacco products and their placement in retail outlets are used for promoting the sales of tobacco products as described in paragraphs 20-23 of these pleadings. Tobacco products are thereby visibly displayed in retail outlets which be- long to the everyday environment of also children and young people (see paragraphs 25 and26 above).

52. The display ban limits the visibility of tobacco products in retail outlets in a significant

manner. The Finnish Government considers that the ban effectively decreases, in particular, the risk of starting smoking, which the visibility of tobacco products, according to studies, increases. Limiting the visibility of tobacco products weakens the im-

pression among children and young people that smoking is normal and acceptable and

tobacco products are easily available. At the same time the display prohibition affects

also the smoking of adults especially by supporting smokers' decision to stop smoking

(seeparagraphs 28 and29 above).

53. When assessing whether the display ban is an appropriate measure for securing the attainment of the objective pursued, it is essential to note that the FCTC Convention and

the documents relating to its implementation authorize and even recommend the adop-

tion of a display ban. The FCTC Convention and the guidelines for implementation of

different Articles of the Convention are based on the best available scientific evidence.

54. According to Article 13 (2) of the FCTC, the Parties to the Convention shall, in accordance with their constitutions or constitutional principles, undertake a comprehensive

ban of all tobacco advertising, promotion and sponsorship. A Party that is not in a position to undertake a comprehensive ban due to its constitution or constifutional principles shall, according to Article 13 (3), apply restrictions on all tobacco advertising, promotion and sponsorship. The minimum obligations pursuant to the Convention are

established in Article 13 (4). According to Article 13 (5) of the Convention, Parties are

encouraged to implement measures beyond these obligations.

55. The Conference of the Parties to the FCTC Convention has adopted guidelines for implementation of the provisions of Article 13 FCTC. The guidelines and recommenda-

tions for implementation of the said Article were elaborated by a working group where

the European Union functioned as one of the key facilitators.

" Cuw C-405198, Konsumentombudsmannen v Gourmet International Products AB [2001] ECR l-Ol7gs,paragraph 32 and 13(16)

56. The guidelines list the display of tobacco products at points of sale as one of the forms of tobacco advertising, promotion and sponsorship within the terms of the Conven-

tion.l3 It is recognised in the guidelines that "display of [tobaccoJ prodttcts is a key means of promoting tobacco products and tobacco use, including by stimulating impulse purchases

of tobacco products, giving the impression that tobacco use is socially acceptable and making

it harderfor tobacco users to quit" andthat "young people are particularly vulnerable to the

promotional effects of product display".

57. It is therefore recommended that "Parties should introduce a total ban on any display and on the visibility of tobacco products at points of sale, including fixed retail outlets and street vendors".

58. According to the order for reference the plaintiff in the main proceedings claims that

there is a lack of documentary proof which can sustain and ascertain the probability of

the effects of the ban in a tenable manner. The plaintiff refers to certain studies (which

are at least partly commissioned by the plaintiff itself) which, according to the plaintiff, establish that the display ban has not reduced tobacco consumption in any of the

countries where such prohibitions have been recently introduced.

59. In that regard, the Finnish Government states that the connection between the display

of tobacco products and tobacco purchases has been proven in several studies.la As the display ban of tobacco products is not the only measure adopted to reduce smoking in any of the countries where the ban is in force, it is almost impossible, however, to prove the individual effect of the ban on the reduction in smoking. As the defendant

has stated, it cannot be a prerequisite for the adoption of a display ban that such scientific documentation can be presented which shows with certainty that the display ban will work. The Finnish Govemment shares the view of the defendant that it must be

the case-law cited. 13 WHO Framework Convention on Tobacco Control : guidelines for implementation Article 5.3; Article 8; Article 11; Article 13, Appendix. to Curt"r, S.M. 2003. New frontier, new power: The retail environment in Australia's dark market. Tobacco Control l2 (Suppl. III): iii95-iiil0l. Pollay, R. 2007. More than meets the eye: On the importance of retail tobacco merchandising. Tobacco Control 16:270-274. Wakefield. M., Morley, C., Horan, J.K., Cummings, K.M. 2002.The cigarette pack as image: new evidence fromtobacco industry documents. Tobacco Control 1l(Suppl. l): i78- i80. Hoek,J.,Gifford,H.,Pirikahu,G.,Edwards,R.,Thomson, G.200T.Howdotobaccoretaildisplaysaffectex-smokersand lapsed quitters? Report forthe Cancer Society of New Zealand and ASH New Zealand. Wakefield, M., Daniella, G., Lisa, H. ?.007. The effect of retail cigarette pack displays on impulse purchase. Addiction 103(2):322-328. 14(16) sufficient that, relying to all available sources, there are reasonable grounds to assume

that the display prohibition will have effect.

60. As regards the situation in the countries where display prohibitions have been intro-

duced, studies indicate that smoking of young people, among others, has decreased after the adoption of the display prohibition.l5 In the view of the Finnish Govemment, individual studies referred to by the plaintiff in the main proceedings should not be

given undue weight in these proceedings.l6

61. Third, it is a matter for the national court to decide, on the basis of the circumstances of law and of fact which charactenze the situation in the Member State concerned, whether the display prohibition at issue goes beyond what is necessary in order to at-

tain the objectives pursued.

62. The Finnish Govemment considers that, in principle, a display ban of tobacco prod-

ucts does not go beyond what is necessary in order to attain the health related objectives pursued. The level of protection sought by the display prohibition cannot be achieved by means that have less effect on the free movement of goods.

63. It should be borne in mind that it is for the Member States to decide what degree of protection of health and life of humans they wish to assure.

64. The plaintiff in the main proceedings refers to several other measures (a license obligation for tobacco dealers, stricter enforcement of age limits, a prohibition against straw man trade and campaigns in mass media) that are, according to the plaintiff, al-

ternative to the display ban and less restrictive for the free exchange of goods.

65. While these measures can, indeed, be used in order to achieve the objective of reducing tobacco use amongst the population in general and amongst young people, they cannot, in the opinion of the Finnish Govemment, be considercd alternatives to the display ban. They are, rather, parallel measures which the Member States may intro-

15 Health Canada. 2007. Canadian Tobacco Use Monitoring Survey 2007. Online: Available at http://www.hc-sc.ec.calhc- ps/tobac+abaciresearch-recherche/stat/ctums-esutc_2007-ens.phB (Accessed 17 January 201 l). The European School Survey Project on Alcohol and Other Drugs (ESPAD). Online: Available at

See also: Assessing the Impacts of Revising the Tobacco Products Directive: Study to support a DG SANCO Impact As- sessment: Final report, p. 194-195, Online: Available at httu//ec.eurooa.eu,&ealth/tobacco/docs/tobacco-ia rand-en.pdf. 15(16) duce in order to achieve the degree of protection they aim to assure. For example Fin-

land uses all of these measures and even more in order to achieve effective protection.

66. As regards the alternative of introducing different forms of regulation relating to the

maximum enabled space for displaying tobacco products or their limited visibility, the Finnish Govemment considers it clear that the effect of such measures will be consi-

derably weaker than that of a total ban.

67. Such less restrictive measures have been experimented with for example in Australia where legislation was introduced to limit the number of packages of each cigarette

brand that was allowed to be visible at points of sale. This restriction proved, however, to be ineffective. After the restriction was inhoduced, the selection of different cigarette brands increased to such an extent that the advertising effect of display of tobac-

co products remained at the same level where it had been before the introduction of the legislation.rT

68. In the light of the foregoing analysis, the Finnish Government considers that it is not

necessary to answer question 2. In the altemative, the Government considers that a general prohibition against the visible display of tobacco products is justified on grounds of protection of health and life of humans under Article 13 of the EEA Agreement unless it is apparent that, in the circumstances of law and of fact which characterise the situation in the EEA State concerned, the objective of the prohibition

can be ensured by measures having less effect on the free movement of goods.

Conclusions

The Finnish Government submits that the EFTA court should give the following

answers to the questions referred to it:

1. A general prohibition against the visible display of tobacco products does not constitute a measure having equivalent effect to a quantitative restriction on the free movement of goods within the meaning of Article I I of the EEA Agreement.

2. It is not necessary to answer Question 2. 16(16)

In the alternative the Finnish Govemment submits that Question 2 should be given the following answer:

2. A general prohibition against the visible display of tobacco products is justif.ed on grounds of protection of health and life of humans under Article 13 of the EEA Agreement unless it is apparent that, in the circumstances of law and of fact which characterise the situation in the EEA State concerned, the objective of the

prohibition can be ensured by measures having less effect on thefree movement of goods.

Respectfully .*/ r'(> i.',fua4<- Agent for the Finnish Government te' Mervi Pere

'' According to an Australian study the only effective way to decrease point of sale promotion is to prohibit the display of tobacco products. An increase in cigarette brand variation since legislation to reduce point ofsale promotion, Health Promotion Joumal of Australia, August 2000, Vol. 10, No l. r ,1l1o.ll undcr N" Registercd at the EFTA Court 'P"""' 2 0' l'f cl av of " " "' "' " " " "...... 1f. " " " " ".. "' {a':'r'*'e*1" w ^w-t, *tg{fl{&ffi'i &rulrhqilw MmlsrRy FoR FoREIGN AFFAIRS OF ICELAND

TO THE PRESIDENT AND MEMBERS OF THE EFTA COURT

WRITTEN OBSERVATIONS

Submitted pursuant to Article 20 of the Statute and Article 97 of the Rules of Procedure of the EFTA Court. bv the

GOVERNMENT OF'ICELAND

Represented by iris Lind Semundsd6ttir

Legal Officer, Ministry for Foreign Affairs acting as Agent in

Case E-16/10

Philip Morris Norway AS

The state, represented by the Ministry of Health and care services in which the Oslo Tingrett (the Oslo District Court) has requested the EFTA Court to give an Advisory Opinion pursuant to Arlicle 34 of the Agreement between the EFTA States on the Establishment of a Surveillance Authority and a Court of Justice (hereinafter, the SCA), concerning whether the prohibition against visible clisplay of tobacco products at retail outlets, as laid down in Section 5 of the Norwegian Act relating to Prevention of the Harmful Effects of Tobacco, is compatible with Articles 11 and 13 of the Agreement on the European Economic Area (hereinafter referrecl to as "the EEA Agreement").

h is hereby certified that this is a true copy of the original. Ministry for Foraign Atfairs. t

Royr<1 avnt,-!{- t -C,lzo,*---ffqfM I ill The Government of Iceland (hereinafter also referred to as the Government) has the honour to submit the following written observations:

I.INTRODUCTION 1. In an application dated 12 October 2010, Oslo Tingrett has requested the EFTA Court to give an Advisory Opinion pursuant to Article 34 of the SCA. The main proceeding concerns a lawsuit filed by Philip Morris Norway AS (hereinafter, the Plaintiffl before Oslo Tingrett against the Norwegian state, represented by the Ministry of Health and Care Services (hereinafter, the Defendant), in which the Plaintiff maintains that the aforementioned prohibition against visible display of tobacco products at retail outlets implies an unlawful restriction pursuant to Article 11 of the EEA Agreement' For further description of the facts of the case, the Government of Iceland respectfully refers to the aforementioned request of the Oslo Tingrett in which it refers the following questions to the EFTA Court:

I Shall Article 11 of the EEA Agreement be understood to mean that a general prohibition against the visible display of tobacco products constitutes a measure having equivalent effect to a quantitative restriction on the free movement of goods?

2. Assuming there is a restriction, which criteria would be decisive to determine whether a display prohibition, based on the objective of reduced tobacco use by the public in general and especially amongst young people, would be suitable and necessary having regard to public

health?

Z. Icelald has enacted similar legislation to the Norwegian that e.g. entails a prohibition against the visible display of tobacco products at retail outlets. in these written observations the Government of Iceland will provide a description of the legal regime regarding the prohibition, its objective, function and effects. In Part II the Icelandic legislation on tobacco control will

be outlined and particularly in Part III the legislation on the prohibition against visible display on tobacco products. Part IV will explain how the display ban was amended after two rulings by the Icelandic Supreme Court in 2006, whereby an exception was added for specialist tobacco shops.

3. The Government of Iceland supports fully the arguments and pleadings put forward by the Defendant in the request for an Advisory Opinion (see especially Section 4.2), whereby it is concluded that the display ban on

tobacco products is compatible with EEA law. Consequently, the Government will not suggest answers to the questions referred to the EFTA Court by the

Oslo Tingrett.

II. ICELANDIC LEGISLATION ON TOBACCO CONTROL 4. With regard to tobacco prevention and control Iceland is among one of the pioneer countries in the world. According to Article 1 of the current Tobacco

Control Act No 612002 the objective of the Act is to reduce damage to health and fatalities caused by tobacco, by reducing tobacco consumption and protecting people from the effects of tobacco smoke.l The hazardous effect of consuming tobacco is well known and does not need detailed repetition, although two points should be mentioned the first being that tobacco consumption creates addiction and it is the single preventable cause of cancer worldwide.2

5. To summarize briefly it should be mentioned that lceland was one of the first states in the world to introduce a ban on the advertisement of tobacco in newspapers, radio, television, cinemas and outdoors in 197i. Since then there

has been a clear trend in the national legislation which has led to a total ban on tobacco adverlising and other form of promotion of tobacco goods. In I9l7 the adverlisernent ban was expanded so that any sort of adveltisement of tobacco and tobacco products was prohibited, including indirect tobacco advertisements. With amendments done in 1984 to the Act sale of tobacco

'l-Og urn tdbaksvarnir nr.612002, a recast of the previous Act on l-obacco Control liorn 1984. For tlre llnglish version ofthe Act olease see Annex I. 2 See 1'or example IilHO Report on the Global'l'obacco Epiden'ric,2009, p. 22, available from: http://whqlibdoc.- rvho.int/publications/2009/978924 1563918 ene lirll.pdf, Endittg the Tobacco Epidentic, A T"obacco Control Strategtc Action Plan for the U.S. Departntent of Health and Hunran Services,20l0, p. 9, available lionr: http:/Avrvw.hhs.sov/ash/initiatives/tobacco/tobaccostrategicplan20l0.pdf, Tobacco or Ilealth in the Elu'opean IJnion, past, present andfittr,rre,2004, p.25, available fiom: http://ec.europa.eu/health/ph deternrinants/lif'e stvle- /J'obacco/Docunrents/tobacco lr_en.pcl l. from self-service machines was prohibited and in 1996 the age-limit for purchasing tobacco was raised from the age of 16 to the age of 18'

6. With Act No 95/2001, further amendments were made to the Tobacco Control Act. Besides the prohibition against the visible display of tobacco products, the sale of tobacco products at retail outlets was made conditional to a permit from the local health inspectorate. In addition a ban was placed on smoking in the service areas of offrcial institutions, business and voluntary organisations, for instance at restaurants and places of entertainment, and where cultural and social activities take place, including sports and leisure activity. Finally, the percentage of sale of tobacco to be spent on tobacco controls was increased

ftom0.7o/oto 0.9o/o.

7, Article 7 of the Tobacco Control Act prohibits all form of advertising of tobacco and smokins accessories in lceland. It now reads:

All forms of advertising of tobacco and smoking qccessories is prohibited in Iceland. This does not apply, however, to publications published abroad by .foreign parties in.foreign languages, provided that their primary purpose is not the advertising of such products. Nolwithstanding, the State Wine, Spirit and Tobacco Authority is authorised to issue a price list for tobacco and to publish a register ofharmful substances in tobacco products.

It is also prohibited to show consumption or any/brm of handling of'tobacco or smoking accessories in advertisements or information on goods or services of'other kinds and in illustrations on goods. Advertising within the meaning of this Act shall refer to, among other things:

I . any.form of inJbrmation addressed to the public or to ct specified target group, including product promotions, window displays in shops, signs of any kind and comparable items.

2. all use of traditional tobacco trademarlrs (name and logo) or parts o.f them; products manufactured under such trademarks are, however, exempted, but the advertising-limitation provisions of the Act otherwise apply to them,

3. any.form of media coverage of individual products.for other purposes than to warn o/'their harmful fficts.

4. distribution of samples of goods to con.sutners.

It is prohibited to place tobacco on the lcelandic market under trademarks which are known or used as trademarlcs for other goods or services.

Anyform of contribution to an event or activity whose objective, or direct or indirect ffict, is to promote tobacco, is prohibited.

Tobacco and tobacco trademarlrs shall be so placed at points of sale that they are not visible to the customer. Specialist tobacco shops, e.g. shops which primarily offer tobacco and smokers' supplies, may, however, place tobacco and tobacco trademarks in such a way inside the shop that they are visible to customers when they have entered the shop.

8. According to Article 17 of the cited Act the local health inspectorates, under the supervision of the Environmental Agency, monitor retail outlets where

tobacco is sold. A violation of Article 7 of the Tobacco Control Act entails a periodic penalty payment per day, a fine or, in the case of gross or repeated violations, imprisonment for up to two years. Decisions taken by the local health inspectorates can be appealed to a complaint board established by Article 31 of the Act No 7/1998 on hygienic and pollution control. The findings of the complaint board are final within the administration but in accordance with the Icelandic Constitution they can be appealed to a court for judicial review.

9. Iceland has implemented the relevant EEA secondary legislation in this field; the Television Directive 89l51}|EEC, the Tobacco Products Directive 2001137lEC and the Tobacco Advertising Directive 20031331F.C. Iceland ratified the WHO Framework Convention on Tobacco Control rn2004.

UI. ICBLANDIC LEGISLATION PROHIBITING VISIBLE DISI'LAY OF TOBACCO PRODUCTS

10. With ActNo 9512001, which entered into force 1 August 2001, the following

paragraph was inserted in the T'obacco Control Act as paragraph 6 to Article 7:

Tobacco and tobacco lrademarks shall be so placed at points of'sale thot they are not visible to the cuslomer.

I 1. Tobacco is defined in Paragraph I of Alticle 2: Tobacco within the meaning of this Act shall refer to tobacco plants (nicotiana) and all products made entirely or in part from them, for consumption, such as cigarettes, cigars, smoking tobacco, snuff and oral tobacco.

12.The explanation given in the legislative proposal firstly provides that the mere fact of having a product visible in sales outlets reminds customers of it and therefore undoubtedly has advertising effect.3 Secondly, with regard to

tobacco products this arrangement could have negative influence on those who are trying to give up tobacco consumption. Thirdly, by setting tobacco up alongside other products in retail outlets it implies especially as regards children and teenagers, that tobacco products are natural and ordinary consumer goods. It is therefore the legislator's opinion that a display ban on

tobacco products is compatible with the total ban on tobacco advertising and is necessary in order for it to achieve its purpose, both of which serve the main principle of tobacco control and the prevention of future tobacco users so as to

attain the overall obiective of the Act outlined in its Article 1 (see paragraph 4

above).

13. Retail outlets in Iceland are in a unique position as regards the sale of tobacco since it is not merely sold by specialty shops like in many cotuttries (only one shop in Reykjavik can be considered to be a dedicated tobacco boutique). Accordingly tobacco in Iceland is sold in supermarkets, kiosks, video stores and gas stations, alongside regular consumer goods such as food, drink, sweets and other products which children and teenagers frequently buy. Often these places of sale, especially in the rural areas of lceland, are meeting places of young people and therefore it is unacceptable to have tobacco visible in these locations, As tobacco is sold in these piaces it is essential that tobacco

packages must be kept away so as to avoid children and young peopie directly reaching them (or even stealing thern). In addition to this as regards young people frequenting particular places of sale, reference is made to the general objectives of the prohibition outlined in paragraph l2 above applicable to all

customer groups irrespective of the type of place of sale.

I Legislative proposal 2000-2001, parlianrentary clocurnent No 484, case No 345. Available in lcelandic at

Altin gi's rvebsite: http:/lrvwrv.alth i nei. is/altext/ I 26ls/0484. htrtL. 14. The most common method nowadays to implement the display ban is to store tobacco in drawers or cupboards at the cash register in sales outlets.a The

Government would like to add that the ban on visible display of tobacco has not raised considerable criticism in lceland, it is accepted by the general public

and retail outlets and its impiementation has been trouble-free. It should also

be noted that before the amendment to the Tobacco Control Act in 2001 there were some retail outlets that already concealed tobacco products.

15. Other amendments besides the prohibition against visible display of tobacco

products were made to the Tobacco Control Act in 2001 as mentioned briefly above. It must be emphasized that all measures introduced through the years are intended to function together to reach the overall objective of reducing tobacco consumption. consequently, the Government concurs with the Defendant, which states that "the fNorwegian] display ban is intended to be included as an element in a bigger package of measures which jointly shall contribute to a reduction in the use of tobacco" cf. Section2.4 of the request for an Advisory Opinion.

16. Originally the display ban outlined above was applicable to all retail outlets

iffespective of the type of place of sale. However after the Icelaldic Supreme

Court pronounced its judgements on 6th of April 2006 in two cases concerning

the display ban (see Part IV below), an amendment was macle to the Tobacco Control Act that same year. It provided for a derogation fi'om the complete prohibition against visible display of tobacco products, allowing specialist tobacco shops, e.g. shops whibh primarily offer tobacco and smokers'

supplies, to place tobacco and tobacco trademarks in such a way insicle the

shop, that they are visible to customers once they have entered the shop. It is

however forbidden to display tobacco pr-oducts in such a way that they are made visible to passer-bys in specialist tobacco shops, such as in display windows.

'See Annex ll 1br pictLrres showing how tobacco products are typically clisguisecl at retail outlets in lcelancl. 17. Regulation No 32512007 on retail trade of tobacco stipulates that specialist tobacco shops are required to have special permit from the local health inspectorate, in addition to the ordinary permit to sell tobacco products in retail trade, cf. Article 1(2). According to Article 3 of the cited regulation the specialist tobacco shop should be distinguished with a nalne, which cannot contain a tobacco trademark, and the subtitle "specialist tobacco shop". A

specialist tobacco shop cannot be a part of or a department in a different kind

of store.

i8. In Section 4.1 of the request for an Advisory Opinion reference is made to the

Plaintiff s argument that the display ban has not reduced tobacco consumption in any of the countries where such prohibition has been introduced and in that regard reference is made to a report done by Jorge Padilla for Philip Morris International.s

19. The Government puts forward it protest as regards the Plaintifl's argument referred to in the preceding paragraph and refers to a Report done by Action on Srnoking & Health in Scotland (often referred to as ASH Scotland), where the effects of the display ban on youth srnoking prevalence are cliscussed.6 Chapter 4.12 of the Report explains in depth the problem of interpreting data when this topic is argued:

As the PH11 [Public Health institute of Iceland] surveys are relatively small (based on about 2,400 annual responses over all age groups) the sample size .for the 15- to l9-year old age groLLp is not large (in 2007 the number of responses in this age group was 322), Given this, the proportion o.f daily smokers in this age gr-oup as reported by the TlL4ttt has a large eruor (+/-4% in 2007, shown in the graph above) - meaning the any year-on-year comparisons of prevalence are likely to be drowned out by the large error (the error in the figures is typically larger than any year-on-year change). Because of'this the PHII themselves, the lcelandic media an.d lcelandic scholars pre.fbr an alternative source, the ESPAD (European Survey Project on Alcohol and other Drugs) where aln'tost B0-90% of the population participate. The ESPAD survey takes place every four years and are overluid onto the PHII ./igures. (As t Padilla, J. The effectiveness ofclisplay bans: the case oflceland, published I October 2009. 6 See the draft report liom l8 October 2009 in Annex Ill, The report, estinratecl to be published in the end of January 201 I, will be sent to the EFTA Court as soon as it is made available to the Governnrent. t The Tobacco Retailers Alliance (tbrmerly the l-obacco Alliance) is a coalition of shopkeepers who sell tobacco proclucts and campaign on issues aff'ecting those rvho sell tobacco. TRA is lunded by the Tobacco Manufactttrers' Association. the sample size of the ESPAD data is several thousand, virtually any change of a percentage point or more will he statistically significant).

lcelandic youth smoking prevalence 1995 - 2008 Data from annual PHll annual suruey and ESPAD

r. ^O 20j u=< 18.6 ()0_(/) 18.3 17 ( 17.9 E,U .t6.e oy s) 15 13.6 u.x oE;{ co$TE:

From this it can be seen that the prevalence of youth smoking looks to be on a decreasing trend using both measures, though the inherent statistical noise and year-to-year unreliability of the PHII figures means the ESPAD data is lillstv to be a more accurate picture of the true trend.

20. It must be added that the sample of the ESPAD survey is all the students of the upper grades in elementary schools who show up fbr class the day the survey is done. It has to be taken into account that the survey done by the Public Health Institute of Iceland (hereinafler referred to as the PHII) is a telephone survey wheleby calls are based on a randorn list of telephone numbers registered in the icelandic telephone directory and that relatively few teenagers, ofthe ages 15-19, are registered in the directory.

21. Considering the relatively short time since tlre ban was established and although, it has to be kept in rnind that it may take time befbre the full effects of the display ban of tobacco appear, the Government is convinced that the

prol-ribition against the visible display of tobacco products introduced in 2001 has had positive effects on youth smoking prevalence. The latest survey done by Capacent-Gallup for the PI-III shows that the percentage of daily smokers in Iceland, in the age group l5-89 year old, has dropped from 22.9% in 2001 to 14.2% in 2010.8 Again, it must be emphasised that it is difficult to isolate the effect of one measure to reduce tobacco control. As can be seen from the proposition to Althingi when the display prohibition was passed, it forms an integral part of the total ban on advertising of tobacco.

Z2.Finally, it should be mentioned that Article 13 of the WHO Framework Convention on Tobacco Control recognizes that a comprehensive ban on advertising, promotion and sponsorship reduces the consumption of tobacco

products and each party of the Convention shall undertake such a prohibition.

IV. CASE-LAW OF THE ICELANDIC SUPREME COURT 23. As referred to in paragraph 16 above two cases have been decided by the

Icelandic Supreme Court on the display ban of tobacco products since it was introduced in the Tobacco Control Act in 2001. They lead to amendments being made to the Act enabling speciality shops for tobacco products to display tobacco products provided certain conditions are fulfilled.

24.\n case No 220/2005, decided by the lcelandic Supreme Court on 6th Apri.l 2006 the Appellants, JT lnternational S.A., JT lnternational Finland OY and Solvi Oskarsson, in a case against the Icelandic state (the Respondent) demanclecl acknowledgement that Solvi Oskarsson was permitted to have tobacco products in his store from JT International S.A. visible to cttstomers, despite the ban in Article 7(6) of the Tobacco Control Act.

25.In its conclusion the Supreme Court stated that the work of the main - appellants enjoyed protection under Article 75 of the Constitution (on the right to pursue the occupation of desire), tlie observance of which could not be

sidestepped and also, that various restrictions may be irlposed on occupatioual activities for the benefit of public health. The Court came to the the conclusion that the Respondent's explication should be rejected, i.e. maintaining that the legislature's leeway being sulficiently liberal to impose restrictions on the

E Lidheilsustiid, Urnfang reykinga, sanrantekt 2010, report (in lcelandic only) available at http:/Avww.lvd- heilsustod.is/nredia/tobaksvarnir/rannsokrtir/4020549 lvdheilsustocl arsskvrsla 2010 l00l I l.pdf, p. l7

10 main appellants' lawful activities, as was argued, without having to ban their activities outright.

26.The Supreme Court also concluded that it had to be assumed that the same applies to tobacco as to all other products displayed at a sales location, that

display of products entails both an expression to customers that the product is available and also, in its way, an encouragement to buy it. However, the legislature, with the complete display ban at sales locations had overstepped the limitations set in Articles 73 (on freedom of opinion and belief) and 75 of the Constitution since the necessity of having the ban apply to stores frequented mainly by those interested in perusing and purchasing tobacco had not been demonstrated. Sdlvi 6skarsson's store was regarded as a speciality shop for tobacco products, and the demand for acknowledgement that he be permitted to have tobacco products from JT International S.A. visible to

customers in the store was therefore asreed to.

27.In case No 462/2005 decided by the lcelandic Supreme Court on 6th April 2006 the circumstances were similar to the aforementioned case. British American Tobacco Nordic OY and British American Tobacco (investments) Limited (the Appellants) in a case against the icelandic state (the Respondent) called fbr recognition by the Court of their permission to display tobacco or their tobacco brands to customers at points of sale, notwithstanding the provisions of Article 7(6) of the Tobacco Control Act.

28. The iceiandic Supreme Court concluded that by irnposing a total ban on displaying tobacco at points of sale the legislature had transgressed the limits imposed by Arlicles 73 and 75 of the Constitution, since the necessity of extending the ban to shops fi'equented principally by persons wishing to obtain inforrnation on and buy tobacco had not been demonstrated. The claim subrnitted by the Appellants called fbr recognition of their permission to

display tobacco products to customers without any delirnitation of the right as

to where and how this would be done. The Court did not accept the claim, as it was of the view that the legislature is permitted to lay down restrictions on the

display of prodticts which are hazardous to human health, such as tobacco, to

t1 customers other than those who wish to buy them. In light of the circumstances the Court felt that dismissal of this item of the Appellants' claims from the District Court was unavoidable.

29. As mentioned above, these conclusions by the icelandic Supreme Court resulted in an amendment to the Tobacco Control Act whereby a new

paragraph was added to Paragraph 6 of Article 7 in the Act allowing specialist tobacco shops, e.g. shops which primarily offer tobacco and smokers' supplies, to place tobacco and tobacco trademarks in such a way inside the shop that they are visible to customers when they have entered the shop. In brief, it can be concluded that the Supreme Court did not interfere with the general prohibition against visible display of tobacco products at retail outlets, which affects majority of sales outlets, but simply concluded that the ban

would be too far reaching for specialist tobacco shops.

V. CONCLUSION

30. On the grounds outlined above the Government is of the view that a prohibition against the display of tobacco products at retail outlets is compatible with EEA law and that it does not go further than necessary in order to attain the objective pursued. Accordingly and as noted before the Government supports fully the arguments and pleadings put forward by the

Defendant as regards the compatibility with EEA law.

Reykjavik, 19 January 20i i

l*CdnMkd/t , I ris Lind Samundsd6ttir

l2 SCHEDULE OF ANNEXES

To the Written Observations submitted by the Government of Iceland in case E-16/10

I. Tobacco Control Act No 612002 (English version updated until 2006, including the amendments made in line with the Supreme Court's conclusions in 2006).

II. Picture showing how tobacco products are typically installed at retail outlets. III. ASH Scotland report, draft from 18 October 2010 (to be published end of

January 201 1).

IV.Icelandic Supreme Court judgment, Case No 22012005. V. Icelandic Supreme Court judgments - Excerpts from Cases No 22012005 and No 46212005.

13 S. R.

MINISTERIO DOS NEGOCIOS ESTRANGEIROS Direcgdo-Geral dos Assuntos Europeus

COURT OF THE

EUROPEAN FREE TRADE

ASSOCIATION

Case E-16/10

WRITTEN OBSERVATIONS

THE PORTUGUESE REPUBLIC

In the request brought bY Oslo Tingrett to EFTA Court to give an advisory opinion in the case of Philipp Morris NorwaY As Y Sfafen

v/h el s*og o m sorg s d e P a rIe m entet Your Highness the President

Your Highnesses the Judges of the Court

Of the European Free Trade Association

The Government of the Portuguese Republic, represented by Luis lnez Fernandes acting as agent and director of the Legal Affairs Service of the Directorate General of European Affairs at the Ministry of Foreign Affairs, and Maria Jo6o Palma, Legal Consultant of the Directorate General of Economic Activities at the Ministry of Economics, acting as Agents,

Having been notified of the request brought by Oslo Tingrett to the EFTA Court to give an advisory opinion in the case of Philipp Morris Norway As v Sfafen v/helse-og omsorgsdepartementef, identified by the case number E- 16t10, has the honour to present your highness with their written observations, in accordance with the dispositions of the Rules of Procedure of the EFTA Court.

Summary ofthsfacts

On the 1 of January 2010 Norwegian law provides: "The visual display of tobacco products and smoking accessories at points of sale is prohibited. The same applies to imitations of such products and cards for use in vending machines. The prohibition does not apply to tobacconist shops. At the point of sale neutral information may be given regarding prices and the tobacco products sold there."

The ban was challenged by a private company (Philip Morris lnternational) and the Oslo Court decided to refer the question of the legality of the ban under the J

European Economic Area Agreement (EEA) to the EFTA Court.

The Oslo Court has asked the EFTA Court to answer the following questions:

,,1. Shall Article 11 EEA be understood to mean that a general prohibition against effect to the visible display of tobacco products constitutes a measure having equivalent a quantitative restriction on the free movement of goods?"

,,2. Assuming there is a restriction, which or,iteria would be decisive to determine whether a display prohibition, based on the objective of reduced tobacco use by the public in general and especially amongst young people, would be suitable and necessary having regard to public health."

ll. lmportance of the case

Because of the similarity of the EEA Treaty provisions and the corresponding EU with Treaty (TFEU)1 provisions, in assessing the question whether the ban is consistent the EEA, the EFTA Court will apply European law as reflected also in decisions of the European Court of Justice.

EFTA tn turn, because of the identical treaty provis'rons at issue, the rulings of the court may serve a critical role in the formation of European Law.

A finding by the EFTA Court as to whether the display ban constitutes a guidance on the restriction on free movement of goods under EEA Articles 11 and its proportionality of the ban under Article 13 will be an important precedent when and if the issue is eventually considered by the ECJ undei Articles 34 and 36 TFEU.

13 EEA is identicalto article 36 r Article 11 EEA is identicalto article 34 TFUE (first question) and article TFUE (second question) lll. Main points to consider

1. For the Portuguese Republic there is no doubt that display bans restrict the free movement of goods. The question is to know what.are the limits to those bans, taking into consideration that they are valid for the protection of public health.

2. For that, it is important to consider that by preventing all advertising and even the display of the packs in stores, in a country that already has a total advertising ban, the display ban creates a practicably insurmountable obstacle for any manufacturer in another European state to introduce a new product successfully.

3. The measure effectivety cements locat tastes and habits, to the prejudice of manufacturers from other Member States.

4. Although the measure is not formally discriminatory, it ended to be inherently discriminatory'.

5. Such bans are neither suitable nor necessary for the reduction of smoking.

a) Display bans have been tried and shown nottoreduce smoking in other jurisdictions, particularly among youth'

b) Such a ban may instead drive legitimate customers to the black market:

- lllicit produets are unregulated and untaxed, and the vastly cheaper prices of such products have long been shown to increase

, "tf, in reality, the measure has a different burden in law and in fact on the impofted goods. it is consider b be distinlity appticabte, no matter that the neasure might be drafted in an indistinctly applicable mannef, Catherini Barnard - "The substantive Law of the EIJ - The Four Freedomb", Oxford, 2007, p. 102. 5

consumption. The promotion of the illicit trade is bad for public health and bad for Member States'

lV. First question Presented

6. The first question presented by the Oslo Court was: "Shall Article 11 EEA be understood to mean that a general prohibition against the visible'display of tobacco products constitutes a measure having equivalent effect to a quantitative restriction on the free movement of goods".

A. Firstty, it is important to say that the ECJ has made clear that the imperative of protecting competition applies to tobacco products

7. Recenly, the ECJ struck down "minirnum price" requirements for tobacco products in lreland, France, and Austria - measures justified by public health - under secondary European law, because such measures were "capable of undermining competition." According to the ECJ,.such measures mustleRsure, in any event, that the competitive advantage which could result for some preducers and importers of those products is not impaired and, thus, competition is not distorted'"3 g. Also the European Commission has recognized the importance of brand communication for competition and the introduction of new brands:

paragraph 30; Case t *" C"r" mmission v. France;Case C-198 t08 Commission v. Austia, C-221rc8 Commission""tt^t "" v. lteland, paragraph 41' 6

i) "[R]estrictions in advertisements and promotions of tobacco products in the UK make it very difficult for manufacturers to develop recognition of new brands. In this respect, BAT, an established competitor, has been unsuccessful in introducing internationally known brand 555 into the United Kingdom, despite significant efforts."a

ii) "Given the advertising bans and restrictions imposed. on promoting of tobacco products, the brand is the key communicator with the final customer. ln the absence of traditionat marketing the access to lP (brand) and know whow (mainly related to blend composition) are most"important factors for the ability to compete effectively in these markets."s

iii) The Commission took this position when product display (as opposed to advertisement and promotion) was allowed in the UK. The difficutty in developing brand recognition referred to by the Commission will be obviously even greater in a market with the retail display ban, where consumers will not even see the products on the shelves.

B. It is also important to refer that a ban on all brand communication is inherently discriminatory

i) Total bans on advertising have been held to be inherently discriminatory, restricting free movement of goods. g. AG Jacobsin Lecterksrp/ec (French law barring certain advertisements on TV):

"[A]n adveftising ban, far from being neutral in its effe,cfs, fends fo operate to the particular detriment of imported goods'"

o Case M.2779, I mperiaUReemtsma, paragraph 54' u Case M.4581, tmpeial/Altadis. 10. ln Gourmet, the ECJ held the Swedish ban on alcohol advertising was inherently discriminatory:

"1ln the case of products like alcoholic beverages, the consUmption of which is linked to traditional social practices and to local habits and customs, a pr:ohibition of all advertising directed at consumers in the form of advertisements in the press, on the radio a,nd on television, the direct mailing of unsolicited material or the placing of posters on the public highway is liable to impede access to the market by products from other Member States more than it impedes access by domestic products, with which consumers are instantly more familiar."6

ii) Again, the restriction on free movement of goods will be even more dramatic and inherently discriminatory where, in addition to the total advertising ban, the mere display of the product at retail will be prohibited.

C. At last, the Portuguese Republic considers that a ban on visual display of tobacco products hinders market access

i) The ECJ has made clear that even if a restriction is not discriminatory, it nevertheless violates the free movement of goods if it hinders market access

11. ln Micketsson and Roos, the ECJ hefd that non-discriminatory restrictions on use of a product nevertheless restricted free movement of goods where, as here, they "have the effect of hindering the access to the domestic market in question for those

u Case C-405/08 Gourmet ECR 1-1795, paragraph 21. 8 goods and therefore constitute measures having equivalent effect to quantitative restrictions on imports prohibited by Article 28 EC [Article 34 TFUE]."7

12. Similarly, in Commission v. ltaty, the Court has held that a non-discriminatory measure that hinders market access of products originating in other member States to the market of the member state violates the free movement requirement of Article 34, in the absence of justification.E

A ban on visual display of tobacco products hinders market access

13. No product originating in another state can be introduced in Norway when such product can neither be advertised nor even displayed on shelves at the point of sale.

14. Such a measure necessarily limits the lawful market to products already established in local customs and habits

15. We cannot think of a clearer example of a restriction on the free movement of goods.

iii) A ruling that such regulations do not hinder the free movement of goods would set a dangerous precedent under European Law

16. Such a precedent could be used by Member States to freeze the market in any product, precluding market entry by new brands and new companies.

z Case C-142105 Mickelsson & Roos. t Case C-110/05 Commission v. ltaly, iv) Under European Law, such a restriction must be justified and proportionate.e

V. Second Question Presented

The Oslo Gourt has also asked the EFTA Court to answer the following question:

"Provided that there is a restriction; which criteria will be decisive for estabtishing whether a visualdisplay ban based on the objective of reducing tobacco consumption in the population in generat and especially among youth would be suitabler and necessary (i.e., proportionate) as regards public health'"

D. Under Article 13 (as under the Article 36 TFEU), the state can impose such restrictions on trade only if they are suitabte and necessary for public health

i) The Article 13 exception for public health is narrow and must be strictly construed:

,,The [EFTA] Court has consistently held that Articles 13 and 33 EEA must be interpreted strictly, as they constitute. derogations from the basic rule that all obstacles to the free fiovement of goods and services between the Member states must be eliminated"lo t See, e.g., Case C-1 1OlO5 Commission v ttaly, paragraph 59 and Case E-9/00 EFIA Surueiltahce Authority v Norwayl2002l EFTA Court Report, paragraph 55' idC"r" i+lOi ieii6ett20osl eFfn Cburt Report 1, at paragraph 53 (our underlining added). See l0

ii) The state must prove that a restriction is both "appropriate for securing the attainment of the objectives pursued and [does] not go beyond what is necessary in order to obtain it," i.e.; that the goals cannot be pursued through less restrictive means.11

iii) The state must show that such bans "are [i] necessary for meeting overriding requirements of general public importance are [ii] proportionate for that purpose, and [iii] those aims or overriding requirements could not be met by measures less restrictive of intra-Community trade.'|12

iv) "The reasons invoked by a Member State by way of justification must be accompanied by appropriate evidence or by an analysis of the appropriateness and proportionality of the restrictive measures adopted by that State, and precise evidence enabling its arguments to be substantiated."l3

v) The Portuguese Republic agrees with the objective of reducing smoking:

-Reducing smoking is a legitimate state objective;

-However, display bans have shown not to reduce smoking;

-They merely reduce competition and increase illicit trade.

vi) Criteria for estabtishing whether the ban is proportionate are:

also, to this effect, the cases rbferred to by the EFTA Court in Cases E-1194 Restamark [1994-1995], paragraph EFTA Court Report 15, at paragraph 56, ind E-5/96 N,r/e [1997] EFTA Court Report 32; at 33. t' Case C-110/05 Commission v. ltaly, paragraph 59. 12 Joined Cases C-34l95, C-36/95 De AgostinitlggTl ECR-13843, paragraph 47. tt Case C-254t05 Commissionv Belgium, at paragraph 36' ll

-whether the state has demonstrated that banning display of tobacco products reduces smoking prevalence, particularly among youth;

-Whether the state has adequately consider:ed the actual effects of the ban on smoking prevaience in the countries that implemented such bans:

-Whether the state has adequately considered potential adverse effects of the ban on competition and illicit trade;

-Whether-the government has demonstrated that no alternative, less restrictive means of achieving its objective of reducing smoking are available.

vii) In applying these criteria, the courl should take the following into consideration:

17. The ban is very restrictive of free trade and competition; therefore, "the reasons invoked by a Member State by way of justification must thus be accompanied by an analysis of the appropriateness and proportionality of the measure adopted by that State and by specific evidence substantiating its arguments."la

18. TherefOre, the state mUst demOnStrate, "by SpecifiC evidenCe," that:

to paragraph 63' Case e-AO2 Leichle l2OO4l ECR l-2641, paragraph 45, and Commission v Austria, -banning display of tobacco products reduces smoking prevalence;

-banning display of tobacco products will not have adverse effects such as an increase in illicit trade;

-no alternative, less restrictive means of achieving its objective of reducing smoking are available, i.e., that a total display ban is necessary.

19. A desire for denormalization of tobacco products is not by itself sufficient to justify a total ban.

20. The Gourt must take into account the notion of the average consumer who, according to the European Commission, should be able to ';inform themselves of the quality and price of products and make efficient choices."

E. There is no credibte evidence that display increases smoking prevalence or that a display ban will reduce smoking prevalencels

15 Health Canada, A proposat to Regutate the Display and Promotion of Tobacco and Tobacco-related products at Retait, Consultation Document, at p. 12 (2006) ("lt is possible that restrictions on tobacco Oispfa's at retail will have an impact on this irend, but this remains very speculative at this time."); riniand, Final Repoft of the Working Group Preparing Tobacco Control Policy Legislative Amendments p. 18 (Dec. 2008) study results on the impact of a ban on display alone on^the -onsumptionand Measures, 'tobacio f'No of producti ire avaita-ble.";. Norwegian-Ministry of Health and care 9"q.qjq:. of servicei, pubtic neariig 6r e propotal on A Ban Against visibte Disptay of roplccg.P.roducts at Point AQvertising Regulation' p. 5 Sale, As Wett As Ceftain other Changes to the Tobicco Damage Act and the published definitely shorirrs the impact that a ban against tna"i. zoozl ("There is yet no scientifii study that aitpi"y would hive on the number of'people who smoke."); 914 DH Consulllrtion at 34 (evidence iruri" Ad loout tne'pu'otic treatttr ulnents of display bahs i's'not conclusive"); The Age, No Evidence Tobacco rejection of. th.e Ban Works: NZ pM, (Feb. 24,2009) (N-ew Zealand Prime Minister commenting on the ' ,'The and it's ai.pr"v ban proposai: reason is'there is no international evidence that it actually works, May 2010-; thebill nudefli expensive to do it."). The Danish Parliament considered a.display ban bill-in "Wg_do not believe that was withdrawn in June zotb. tne Minister of Health (Bertel Haard6r') explained: The Swedish the few countries wno have implemented something similar can document any real effect-" parliament debated a display ban in June 2010lnd rejected the proposal in favor.of strengthening (MP Jan R' enforcement of youth imof

i) Likewise, the recently published impact assessment of the proposed revisions of the Tobacco Products Directive states that "we have not been able to point to reliable quantitative data regarding the impact of promotion and display restrictions or bans in display stores," and "no good estimates of prevalence changes on a population level could be obtained from the literature."l6

F. Display bans do not promote public health because they do not reduce smoking

Several other countries have now tried display bans'

ii) The experience of those countries shows that such bans do not reduce smoking, in particular youth smoking. Experience in these countries provides "no empirical support for the proposition that a display ban is likely to cause a reduction in smoking prevalence."lT

G. Rather than reduce smoking, such measures drive Gonsurners to the illicit trade

i) The black market is already an enormous problem in Europe and around the world.

16 at 200 (Sept' 22' Rand Europe, Assessing the tmpacts of Revising the Tobacco Products Directive, 2010). p. (oct' 2009) it-'iiOitt", J., The Effectiveness of Disptay Bans: the Case of lceland, LECG, 5 (commissioned bY PMI). l4

record 21. Smokers are already choosing to purchase from the illicit market in Bloomberg numbers. A recent study of illicit tobacco trade in 84 countries, funded by the and Gates foundations, found that a worldwide average of more than one in ten European cigarettes -- over 600 billion cigarettes per year -- is illicit. According to the per year to Commission,',EIJ and Member Sfafes /ose EUR 10 bitlion in revenue due i I I i cit ci g a refte trade."18

22. Display bans facilitate illicit trade because keeping tob'acco producls under the the counter makes it more difficult to detect contraband/counterfeit brands; facilitates purchases infiltration of legitimate businesses by illicit racketeers; and, by making shops inconvenient and time-consuming, leads to a migration of customers from small towards illicit markets in what a retail association calls a "contraband epidemic."le

ii) lllicit trade increases consumption

23. In the words of the independent researchers in the public health and anti- tobacco communitY:

,,smuggling poses a serious threat to public health also because smuggled cigarettes are sold at below market price. Cigarettes are available cheaply, thereby increasing consumption and undermining efforts to keep youngsters from smoking'"2o

tt EC Press Release dated September 27,2010' on a tt-s!",';;.,'it;"kh"rr citv, it Shoutd be D:ifficult fo Sfart Smoking, (Nov.20' 2008) (commenting "T_he. may increase if tobacco is display ban proposat, tne SweOish Minister of Health state_d: iilegal sales so|dundertnecounteit;-oairvMai|,CigaretteDispitayBan,'WiItHitSfores,,and.'Co.uldCreateBlack the possibility that the display Market, say shops, ze,2oog)'1.'r[" Ganadian dovernment ignored tj"ii. we have a contraband ban would Orive many p""pi" iot'"iOs ittegat sources for tobacCo qnq ryy this country are now illegally epidemic. our research has'found that 52 plr cent of the cigarettes sold in president of the Canadian Convenience imported and they U"N! r"fJ openty in schools," quoting Stores Association) "r" toWHo, FCTCWorking PaPer, (1999). 15

"The illicit tobacco trade results in increased consumption and thus health problems, because it makes tobacco available more cheaply."21

"To the extent that smokers evade excise taxes by purchasing contraband, the use of excise taxes to discourage smoking is rendered ineffective. As such, the market for contraband cigarettes simultaneously both of the major policy objectives of tobacco taxation: additionaltax revenue and reduced smoking'"2z

H. Display ban severety restricts brand competition in favor of price competition; this distortion of competition may lead to lower prices and increased consumption in the long run

i) ,,lf the brand attraction cannot be maintained, the tobacco market may become more commoditized, and profit margins (but also prices) would drop." Rand Final Report (Sept' 2010).

'there ii) ,,lf the industry's ability to maintain existing brands" is reduced, is a real risk that growth of generic brands gradually leads to price compression in the industry price spectrum." Morgan stanley, Tobacco Research RePoft(Jan. 30, 2007);

iii) lt is widely accepted in the public health community that high prices "The price reduce consumption, and low prices increase cqnsumption: mechanism is generally accepted to be the most effective population-level

21 tobaccocontrol'bmj'com (2008)' Joossens and Raw, Progress in Combating Cigarette Smugqlilq,.in ?2 Gabler and Katz, Contriband Tobacco in Canada, p. 20 (July 2010). t6

policy lever available to government to combat smoking [because] cigarette consumption and smoking cessation are both responsive to changes in the

price of tobacco Products."23

The Finnish Gonstitutional Law committee Found a similar Ban to Be DisproPortionate

i) ln 2010, the Constitutional Law Committee of the Finnish Parliament reviewed a proposal for a point of sale display ban substantially identical to the Nonrvay ban.

ii) The Committee advised Parliament that the proposed ban was unconstitutional because it would disproportionatly restrict the use of brands and access to the market.

24. Restricts use of lavuful property in business: "The proposed display ban strongty restricts the trademark holder's right to exploit this property in business activity."24

2. p. (May See.a/so Lewit, E', et UK Consuttation on the Future of Tobacco Control, 1'2.27, 21 20-09) of Law and Economics' Vol' al., ine Effects of Govemment Regutation on Teenage Sryokj1q, Journal Reduce Smoking, i.+, 545-569 (1981ti lfit and-Coate, The Poteitiatfor Using Excise laxes to ip Public Policy, and- Journal of Health Economics, Vol. 1, pp. 121-145 (1982); Lewit et al,, Pice, (1997); Glied. S'' r9b9999: The Limits of Smoking in young peiit",iooacoo control, Vol. 6, SS'17'24 Farrelly and protecfibn, American Journal of Public Health,-Vol. 93, pp. 412-416 ( Mafgl 2003); Chitd -- United Ai"y, n"rponses fo lncreasls in Cigarette Prices by Race/Ethnicity, lncome and Age Groups -Mortality pp' 605-609 (1998); Sfafes 1976-1993, M;;bidlt and Weekiy Report , Vol' 47, no' 29, NBER chaloupka, F., and Grorsm"n, M., Price, Tobacco controt Polices and-Y-outh.smoking, (1996); Chaloupka and Wechsler, Wort

ZS. Restricts use of trademarks to distinguish products: "The display ban is significant as regards the freedom of exprbssion because it together with its advertisement ban relevantly restricts an entrepreneur's possibility to exploit trademark as a special characteristic for products offered for sale or otherwise emitted in business activity to be distinguished from products of others"2s and

26. Restricts ability to market products: "The provision means a heavy restriction on the possibility to market the essential product groups of the store and also interferes indirectly in the freedom [o engage in commercial activity."'u

27. Disproportionate because "unnecessarily strict.r' The Committee concluded that the proposed ban was unconstitutionally disproportionate because its impact on these rights was deemed "unnecessarily, strict."27

iii) The findings of the Constitutional Committee -- that the display ban proposed in Finland constitutes "a heavy restriction on the possibility to market the essential product groups" and is disproportionately strict - applies with full force to the Norway ban that is the subject of the EFTA court referral.

2a Constitutional Committee Statement dated May 5, 2010', atp' 2' 'u Id. al3 (emphasis added). td. at 4. 'u proposal to permit the use ,'il.1i3 (emphasis added). ln response, the Finnish legislature amended the peruse at the point of sale. while we agree ot which consumers can is disproportionate, we disagree that with""taiogl"s'displayinjiiioemarki the Constitution"ii"* Cormittee's finding that the display.ban improved the.law's proportionality but the amendments made the display oan proporiionate. rrrey'slilhtly justified, proportionate measure' in" and price list do ioo-little to make the display ban a ""t"fogue l8

Vl- Conclusions

The portuguese Republic is of the view that the questions posed by the oslo District Court should be answered as follows:

Question 1

A legislation which establishes a general prohibition against the visible display of tobacco products constitutes a measure having equivalent effect to a quantitative restriction on the free movement of goods is precluded by article 11 EEA, because it affect market ac@ss of imported products.

Question 2

Although agreeing with the goal of reducing smoking, it is considered that such 13 EEA, restriction is not justifiable by public health reasons, in the terms of the article as it is not adequately supported that this restr:iction is the most appropriate and proportionate measure for securing the attainment of the objectives pursued.

The Agents

Luis Inez Fernandes Maria Jo6o Palma Rcgictered at thc EFTA Court under n" '.f.;J,Qlla'rr

".20,1J..."

Ministry of Economy, Trade and Business Environment

Directorate for Trade Policy

No. 67074lDCPC/19.0 | .20l I Bucharest, January 1 gth, 201 |

ROMANIA's comments on the Case E-16/10 - Philip Morris Norway AS v Staten v/Helse- og omsorgsdepartementet, Advisory Opinion in proceedings pending between Philip Morris Norway AS and the Norwegian State, represented by the Ministry of Health and Care Services, concerning whether Articles 1l and 13 EEA preclude a prohibition on putting tobacco products on display in sales outlets.

Taking into consideration all the arguments brought by the both parties we believe that such a measLtre could be adopted only when a causality link is established between the consumption of a product and its displaying. This causality link has to be proven by scientific arguments and studies. We do understand that some products are not healthy and the number of ybung people consuming tlrese prodLrcts is increasing, but all the participants to international trade have to adopt a proper trade conduct.

We consider that the assessment of the justification of the measures proposed by the Norwegian Goverttmelrt must tal

The Norwegian State should think for other less damaging methods to cut consumption of these products (age lirnits, educational canrpaigns, even limited visibility of those products). A large number of States thought of different policies trying to reduce the consumption.

Measures to protect^healtlr can be introduced based on the precautionary principler. According to the Court o1'Jr"rstice2, wherr the Member States introduce measures to protect health under article 36 TFUE, the br"rrden of proving the necessity of such measures rests with them.

In our opinion. display ban could be considered discrimination among producers, enhancing the power of those already present on the Norwegian market with well known trademarks and brands

I See Case C-l57/96 Nationcrl Fat'nters Union |9981 ECR 224. The Cottrt stated: "where there is uncertainty as to the exi'stence ot' exlent of right.s to htrman health, the instittttion nay take protective measnres withottt having to wait trntil the rettlity attd seriou:;ness of those risks become.ftily apparent' - See for example Case227182 Van Bennekorz [1983] ECR 3883, para.40 and Case 178/84 Commission v Germanv (Reinheit.sgebot) |9871ECR 1227, para. 46 and giving no chance to those producers trying to get access to the Norwegian market and beconrirrg visible for the consurners.

These coLrld be also corrsidered a barrier into trade and aclear breach of all WTO principles.

Romania will always encourage healthy and ethical policies, but within the limits of fair and equal trade corrditions.

Emilian Carlogea

Director Registered at the EFTA Court under 1v" .'f;t6fro-zs

...... ]J.,.....". day of ..... "4.V"*"rt...".. 20JJ.. IN THE EFTA COURT cAsE E-16/10

PURSUANT TO A REQUEST FOR AN ADVISORY OPINION MADE BY THE OSLO TINGRETT

BETWEEN:

PHILIP MORRIS NORWAY AS Plaintiff -and-

NORWAY

Defendant

WRITTEN OBSERVATIONS OF THE UNITED KINGDOM

Submitted by: and:

Stefan Ossowski lan Rogers Agent for the United Kingdom Barrister Treasury Solicitor's Department One Kemble Street London WC2B 4TS

Service of documents may also be made by fax or e-mail at:

Fax: +44 (0)20 72103132

E-mail: stefan.ossowski@tsol. gsi.gov. uk

19 January 2011

I CERTItr/ THAT TI..IIS IS A TRUE QOi]Y OF TFIE ORIGINAT

r.o'rlF ncn ; t-l: ui\liiED KiNGD{IM 'f r easury Sciicitci's Depattment L)ne Ke!-jitile Street l..r-.rn cicn $,'C2B 4TS Pursuant to Article 20 of the Statute of the Court of Justice of the European Free Trade Association States ('the EFTA Court'), the United Kingdom submits the following written observations on the questions referred for an advisory opinion in accordance with Article 34 of the Agreement between the EFTA States on the Establishment of a Surveillance Authority and a Court of Justice by the Order of the Oslo District Court ('Oslo tingrett') dated 12 October2010.

INTRODUCTION

1. The request for an advisory opinion ('the Reference') concerns the compatibility with EEA law of the Norwegian legislative prohibition against visible display of tobacco products in retail outlets ('the prohibition of tobacco displays').

2. The Oslo tingrett notes that there is case law from the EFTA Court and the Court of Justice of the European Union ('the CJEU') in respect of 'traditional marketing' which may be relevant to the determination of the first question. However, it considers that further guidance from the EFTA Court is required relating to the lavtrfulness of a prohibition against the visible display of tobacco products.

3. The Oslo tingrett also states that whilst it must be held that the legal framework is not directly discriminatory, in the sense that it applies equally to all tobacco products irrespective of their origin, the parties disagree as to whether the legal framework is indirectly discriminatory (page 2 of the Reference).

4. ln relation to the second question, the Oslo tingrett seeks guidance from the EFTA Court on the criteria to determine whether a potential restriction would be 'suitable and necessary' having regard to public health in accordance with Article 13 of the EEA Agreement.

THE FIRST QUESTION

5. By its first question, the Oslo tingrett essentially asks whether the prohibition 3

of tobacco displays is a measure having equivalent effect to a quantitative restriction on imports within the meaning of Article 11 of the EEA Agreement, which would require to be justified under Article 13 of the EEA Agreement (which is the subject of the second question).

6. The United Kingdom submits that the prohibition of tobacco displays does not constitute a measure having equivalent effect to a quantitative restriction on the free movement of goods. The prohibition is a 'selling arrangement' within the meaning of Joined Cases C-267191 and C-268191 Keck and Mithouard [19931 ECR l-6097. lt applies to all relevant traders operating within the relevant territory, and does not affect, in law or in fact, the marketing of domestic products differently from the marketing of products from other States.

(a) A selling arrangement without discrimination on grounds of origin

7. ln Keck and Mithouardthe CJEU held:

16. ... the application to products from other member states of national provisions restricting or prohibiting certain selling arrangements is not such as to hinder directly or indirectly, actually or potentially, trade between member states within the meaning of the Dassonville judgment (Case 8174119741 ECR 837) , so long as those provisions apply to all relevant traders operating within the national territory and so long as they affect in the same manner, in law and in fact, the marketing of domestic products and of those from other member states.

17. Provided that those conditions are fulfilled, the application of such rules to the sale of products from another member state meeting the requirements laid down by that state is not by nature such as to prevent their access to the market or to impede access any more than it impedes the access of domestic products. Such rules therefore fall outside the scope of article 30 of the Treaty.

8. An earlier passage had made it clear that the mere fact that a selling arrangement reduces sales volumes, and consequently volumes of imports, is insufficient to engage Article 34 TFEU (equivalent to Article 11 of the EEA Agreement)(paragraphs 13 and 17).

9. The prohibition of tobacco displays in retail outlets under the legislation is such a 'selling arrangement', in that it regulates how tobacco is sold. Accordingly, the prohibition could only fall within the scope of Article 11 if the 4

Plaintiff could establish that it will not in fact affect the marketing of domestically manufactured and imported products in the same way. lt is not suggested by the Plaintiff that the prohibition is discriminatory in law (and could not be, since the prohibition applies without distinction as to the origin of tobacco products). The Oslo tingrett has stated that for this reason it must be held that the prohibition is not discriminatory in law (page 2 of the Reference).

10. Accordingly, the Plaintiff must show, as a threshold requirement, that the prohibition of tobacco displays will restrict the sale of tobacco products manufactured in other States to a greater extent than it will restrict the sale of domestically manufactured tobacco prod ucts.

11. However, the Oslo tingrett states that there is no production of tobacco products in Norway (page 3, point 2.1 and page 15 of the Reference). All tobacco products retailed in Norway are manufactured in other States.

12. Accordingly, the Plaintiff is unable to show that the prohibition is discriminatory in fact. In a market characterised by the absence of domestically manufactured tobacco products, there can be no possibility of the Plaintiff showing a differential impact on foreign manufactured products.

13. All tobacco products, including any new products introduced to the market, are treated in the same way by the legalframework.

14. It is not clear from the Reference whether the Plaintiff accepts that the prohibition is a selling arrangement. lt refers to the case of Case C-405/98

Gourmet lntemational 120011 ECR l-1795 and says that the prohibition 'hinders access of products originating in other Member States to the market of a Member State' as the CJEU found in Case C-142105 Mickelsson and Roos [2009] ECR 14273 (page 1 1 of the Reference).

15. The assertion that the legal framework hinders market access of products originating in other Member States is insufficient in the absence of a discriminatory effect see paragraph 13 of Keck and Mithouard.

16. The Plaintiff states that in practice the prohibition on tobacco displays 5

precludes market access of new products from other EEA States for the benefit of brands which are already established locally, referring to Gourmet. However, the brands which are established in Norway must be foreign manufactured goods, given that the Oslo tingrett has found that there is no domestic production of tobacco products. Even if the Plaintiff were correct in its assertion (which, it is submitted, is a matter for the national court to assess), it therefore does not assist the Plaintiff in showing the required discriminatory effect on imported tobacco products.

17. Further, the United Kingdom submits that even if some tobacco products were manufactured in Norway, any alleged difficulty caused by the prohibition would apply irrespective of the place of manufacture of the product and would apply to the same extent to new brands manufactured in Norway as to imported products.

18. The United Kingdom agrees with the Norwegian Ministry of Health and Care Services, representing the State, that there are important distinctions between the prohibition of tobacco displays and the circumstances considered in Gourmet. In that case, which concerned an advertising prohibition, the CJEU held (paragraph 21):

Even without its being necessary to carry out a precise analysis of the facts characteristic of the Swedish situation, which it is for the national court to do, the Court is able to conclude that, in the case of products like alcoholic beverages, the consumption of which is linked to traditional social practices and to local habits and customs, a prohibition of all advertising directed at consumers in the form of advertisements in the press, on the radio and on television, the direct mailing of unsolicited material or the placing of posters on the public highway is liable to impede access to the market by products from other Member States more than it impedes access by domestic products, with which consumers are instantly more familiar.

19. It is submitted that this passage from the CJEU's judgment shows that there is no generalised presumption of a discriminatory impact in the case of advertising restrictions, as it is for the national court to carry out a precise analysis of the facts in each case.

20. Furthermore, it is submitted that the finding in that case was based on the particular character of the Swedish alcohol market, where an advertising ban inhibited the penetration of a northern European market (dominated by 6

traditional, locally produced beverages) by wine (which was the subject-matter of that case) necessarily produced in more southerly Member States. There is no suggestion that the same is true of the tobacco market, i.e. lt is not suggested that the consumption of tobacco products is 'linked to traditional social practices and to local habits and customs'.

21. The prohibition of tobacco displays regulates the behaviour of retailers, and operates irrespective of the origin of the tobacco products they stock. In Case C-412193 Leclerc-Siplec [1995] ECR l-179, the Court, disagreeing with Advocate General Jacobs, held that Article 34 did not apply to legislation prohibiting the distribution sector, including retailers, from engaging in advertising. The Court noted that the legislation might reduce the volume of sales (paragraph 20) but referred to Keck and Mithouard (paragraph 21), found the prohibition introduced by the legislation to amount to a selling

arrangement (parag raph 22\, and concluded :

23 Furthermore, those provisions, which apply regardless of the type of product to all traders in the distribution sector, even if they are both producers and distributors, affect the marketing of products from other Member States and that of domestic products in the same manner.

22. The effect of the legal framework upon the marketing of existing or future tobacco products will likewise be the same whether the tobacco product is manufactured in the Norway or in other States. Accordingly, the legislation is

not within the scope of Article 1 1 of the EEA Agreement.

(b) Effects too uncertain and indirect

23. The United Kingdom also submits that Article 11 of the EEA Agreement does not apply to national legislation:

(i) which makes no distinction according to the origin of the goods to which it applies;

(ii) whose purpose is not to regulate trade in goods with other Member States; and

(iii) whose restrictive effects on the free movement of goods are too 7

uncertain and indirect for the obligation which it lays down to be regarded as being of a nature to hinder trade between Member States;

(see Case C-372192 Peralta [1994] ECR l-3453, paragraph 23).

24. It is submitted that the prohibition of tobacco displays meets those criteria.

25. First, and self-evidently, it makes no distinction according to the origin of tobacco products.

26. Secondly, its purpose is not to regulate trade in goods with other Member States, but to further the public health objectives of Norway. The aim of the prohibition on tobacco displays is set out at paragraph 2.4 of the Reference. Whilst the assessment of the aim is a matter for the national court in the first instance, and the Oslo tingrett has not yet formed an opinion on this matter (page 6, paragraph 2.4 of the Reference), the Plaintiff states that it supports the goal of reducing tobacco consumption (page 11, paragraph 4,1). The Ministry of Health and Care Services states that the prohibition is based on the objective of reducing smoking in general and amongst children and young people in particular, in addition to supporting adults who wish to give up smoking. lt also considers it relevant that the prohibition may have a more lasting effect by influencing attitudes and weakening the social acceptance of tobacco use (page 15-16 of the Reference). Over a longer period of time, the lack of visible displays is intended to contribute to the denormalisation of tobacco use (page 17 of the Reference). On either the Plaintiffs or the Defendant's view of the aim or purpose of the prohibition, the purpose is therefore not to regulate trade in goods and the second criterion is satisfied.

27. Thirdly, any interference with the free movement of goods is an incidental and unintended consequence of a measure of social reform to protect human health. Any restrictive effects of the prohibition upon the free movement of tobacco products are speculative and accurately described as 'uncertain and indirect', so that the third criterion of the Peralta principle is met.

28. In those circumstances the prohibition of the display of tobacco products cannot be regarded as being of such a nature as to hinder trade between 8

States because it is a 'selling arrangement'without discrimination on grounds of origin and, or in the alternative, because its effects are too uncertain and indirect for the obligation which it lays down to be regarded as being of a nature to hinder trade between States.

THE SECOND QUESTION

29. By the second question, the Oslo tingrett asks, assuming there is a restriction, which criteria would be decisive to determine whether a prohibition of tobacco displays, based on the objective of reduced tobacco use by the public in general and especially amongst young people, would be suitable and necessary having regard to public health.

30. The United Kingdom supports the position of the Norwegian Ministry on this question - which appears to be essentially that it is sufficient that, relying on all available sources, there are reasonable grounds to assume that the prohibition of tobacco displays will have the effect of furthering its objectives (page 16 of the Reference). The United Kingdom also supports the view of the Norwegian Ministry that it is for the national court to decide on the suitability of the display prohibition.

31. The United Kingdom submits that the correct approach in assessing the suitability and necessity of tobacco control measures sought to be justified on public health grounds under Article 13 of the EEA Agreement is that the State's margin of appreciation is broad and the EFTA Court will not interfere unless the measure was manifestly unreasonable or manifestly inappropriate having regard to the objective which the State is seeking to pursue. lt is for the State to decide on the degree of protection whlch it wishes to afford to public health and on the way in which that protection is to be achieved (Case C-262102 Commission v France [20041ECR l-6569 at paragraph 24). This authority is drawn to the Court's attention as it appears to support the principle stated in the Reference to derive from the Supreme Court ruling in the Pedicel case (page 17 of the Reference) that the State 'must be able to establish the level of protection to be afforded to public health'. I

32. lt is further submitted that as a consequence of the principle that it is for the State to decide on the degree of protection which it wishes to afford to public health and on the way in which that protection is to be achieved is that the Union Courts do not enquire whether the benefits to human health deriving from the measure outweigh any detriments.

(a) The importance of public health

33. The CJEU has consistently held that the health and life of humans rank foremost among the interests protected by Article 36 TFEU (see for example Case C-322101 Deutscher Apothekeruerband eV v 0800 DocMonis NV and Jacques Waterual [2003] ECR l-14887).

(b) The position of the national legislature and the limited appraisal of the Union Courts in health protection cases

34. fn Case C-491101 R v Secretary of Sfafe ex p BAT and lmperial Tobacco 120021ECR l-11453, the Court held (in a case concerning the validity of an EU Directive harmonising national law on aspects of the manufacture, presentation and sale of tobacco products) that the Union legislature must be allowed a broad discretion in an area such as that involved in that case, which entailed political, economic and social choices on its part, and in which it was called upon to undertake complex assessments. The legality of a measure adopted in that sphere could be affected only if the measure was manifestly inappropriate having regard to the objective which the competent institution was seeking to pursue (paragraph 123)1.

35. The United Kingdom submits that, as the Union legislature and national legislatures are confronted with similar considerations when enacting public health measures, the margin of appreciation applicable is the same and the EFTA Court should not interfere with the national legislature's assessment unless the measure is manifestly inappropriate having regard to the objective

1 See also paragraphs 47 and 48 of the judgment of the CJEU in Case C-21OlOg Swedr.sh Match. it is seeking to pursue2.

36. A similar approach can be seen in Joined Cases C-1/90 and C-176190 Aragonesa de Publicidad Exterior SA and Publivla SAE v Departamento de Sanidad y Seguridad Socia/ de la Generalitat de Catalufia [1991] ECR 14151 at paragraphs 14 and 17, where the Court asked whether the criterion in question was 'manifestly unreasonable as part of a campaign against alcoholism'.

37. The Aragonesa case concerned national rules on alcohol advertising. Finding the national law justified, the CJEU held, firstly, that advertising acted as an encouragement to consumption and the existence of rules restricting the advertising of alcoholic beverages in order to combat alcoholism reflected public health concerns, and secondly, in the absence of common or harmonized rules governing in a general manner the advertising of alcoholic beverages, it was for the Member States to decide on the degree of protection which they wished to afford to public health and on the way in which that protection was to be achieved, whilst within the limits set by the Treaty and the principle of proportionality (paragraphs 14 to 16).

38. The CJEU held that a national measure such as that at issue restricted freedom of trade only to a limited extent and the key criterion (the alcoholic strength threshold) did not appear to be manifestly unreasonable (paragraphs 17 and 18).

39. Case C-262102 Commission v France 120041 ECR 6569 and its companion case, Case C-429102 Bacardi [2004] ECR l-6617 concerned French rules supplementing the ban on alcohol advertising on television which regulated the televising of 'bi-national' international sporting events taking place outside France (such as 'away' matches played by French teams) and sought to

2 See the Opinion of Advocate GeneralGeelhoed at paragraphs 119-121, who equated the positions of the Union legislature harmonising national tobacco control legislation with that of the national legislature enacting such legislation. 11

prevent the showing on television of alcohol advertising on hoardings at the sports ground. The effect of the policy was that French broadcasters put pressure on organisers of such events not to allow alcohol advertising. The same policy did not apply to 'multi-national' sports events and there was no prohibition of advertising in printed media or on advertising hoardings within France (including hoardings at sports stadia).

40. The application of the principle that Member States are free to decide in what way they will protect human health is illustrated in the Opinion of Mr Advocate Generaf Tizzano, who considered various criticisms advanced in relation to the legislation and continued (original emphasis):

78. For my part, I have no difficulty in conceding that some decisions of the French legislature may indeed appear questionable. There can be no doubt that to allow significant derogations from an advertising ban or to limit the appearance of images of advertising hoardings on television without prohibiting the placing of those hoardings in the stadia may reduce the effectiveness of the State's action to protect public health.

79. I am nevertheless of the view that these decisions fall within the freedom of the Member States to 'decide on fhe degree of protection which they wish to afford to public health and on the way in which that protection is to be achieved', and are therefore among the options available to Member States for attaining that objective. By contrast, what falls outside the discretion of the Member States and thus within the purview of the Court is, as we have seen, the appropriateness and necessity of such decisions in relation to attainment of the declared objectives, given that only compliance with those conditions can justify the restrictions deriving from those decisions.

80. Accordingly, what must be ascertained is not which measures would be feasible and more effective in abstract terms but whether the actual measures adopted by France in the exercise of its discretionary power to impede the televising of bi-national sporting events at which advertising for alcoholic beverages is displayed are appropriate for achieving the degree of protection of public health pursued by that State.

41. The Court reasoned to the same effect: see Commission v France paragraphs 30 to 39 and Bacardiparagraphs 36 to 40.

42. A further consequence of the principle that it is for the Member States to decide on the degree of protection which they wish to afford to public health and on the way on which that protection is to be achieved is that in this area the Courts do nof enquire whether the benefits to human health deriving from 12

the measure outweigh any detriments. There is no trace of such an enquiry in Commission v France and the terms of paragraph 24 of the judgment exclude it.

43. The Opinions of Advocate General Geelhoed also make the same point: see paragraph 230 of the Opinion in Case C-491101 R v Secretary of State ex p BAT and lmperial Tobacco and paragraphs 111 and 112 of his Opinion in Cases C-434102 and C-210/03 Arnold Andrd and R (Swedish Match) v Secretary of Sfafe forHealthl2004l ECR l-11825, concerning an EU Directive prohibiting the sale of a tobacco product called oral snuff or 'snus'. In this latter case, he stated that the principle of proportionality is not to be confused with a comparative assessment of the protection of public health and the commercial interests of private companies.

(d) The application of Article 13 where the benefits of a measure cannot be precisely estimated

44. Differences of opinion on the effects of a measure do not mean that the legislator exceeds its margin of discretion in preferring one view to another. The existence of contrary opinions in other reputable studies does not show that the legislator did not have reasonable grounds for acting as it did. As Mr Fennefly put it in Case C-376/98 Germany v Parliament and Council [2000] ECR l-8419 (paragraph 160 of his Opinion):

160. ... the Community should not be prevented from acting in the public interest simply because the justification of its action necessarily depends, not on 'hard' scientific studies, but on evidence of a social scientific character, which predicts, on the basis of past behaviour, the future responses of consumers to changes in their level of exposure to promotional material. Furthermore, where the Community legislator can show that it acted upon the basis of reputable scientific studies in the field, the fact that other apparently reputable studies have reached a contrary conclusion does not, in itself, show that the legislator did not have reasonable grounds for acting.

45. At paragraph 162 the Advocate General proceeded to review the evidence. He noted that the Council had produced evidence in support of an association between tobacco advertising and consumption, whilst lmperial Tobacco had produced evidence to the contrary. He concluded '[i]t suffices, in my view, to have regard to the studies upon which the institutions [viz the Parliament and 13

CouncilJ rely. The reports find a correlation both between tobacco advertising and the taking up of smoking, particularly among the young, and between the banning of advertising and reductions in average per capita tobacco consumption'. At paragraph 163 he continued:

163 | conclude, on the basis of this evidence, that the Community legislator had reasonable grounds to believe that the comprehensive prohibition of tobacco promotion would result in a significant reduction in consumption levels and would, thus, contribute to the protection of public health.

46. The criteria applicable where the benefits of a measure are uncertain were set out clearly in both the Advocate General's Opinion (paragraph 11a) and the judgment of the CJEU in Swedish Match. The Court, after referring to the principle of proportionality (Amold Andr6 paragraph 45) and the principle that only manifestly inappropriate measures contravene it (paragraph 46) continued:

47 With regard to Article 8a inserted in Directive 89/622 by Directive 92141, it is apparent from the preamble to the latter directive that the prohibition of the marketing of tobacco products for oral use was the only measure that appeared appropriate to cope with the real danger that those new products would be used by young people, thus leading to nicotine addiction, with those products causing cancer of the mouth in particular.

48 Arnold Andr6 essentially submits that, having regard to the state of the scientific information available to the Community legislature in 2001, when Article 8 of Directive 2001/37 was adopted, on which it moreover relied in amending the rules governing the warning refened to in Article 5(4) of that directive, maintenance of the prohibition of marketing tobacco products for oral use was disproportionate in relation to the objective pursued and did not take account of the development of that scientific information.

49 The answer to that argument must be that, while some experts could from 1999 call into question the assertion that, as the 16th recital in the preamble to Directive 92141 puts it, 'these new products cause cancer of the mouth in particular', all controversy on that point was not eliminated at the time of adoption of Directive 2001137. Moreover, while part of the scientific community accepted that tobacco products for oral use could be used as substitute products for cigarettes, another part challenged the correctness of such a position. From that situation it must be inferred that the scientific information which could have been available to the Community legislature in 2001 did not allow the conclusion that consumption of the products in question presented no danger to human health.

47. ln agreement with the Advocate General, the Court also dismissed the argument that the prohibition was disproportionate on the grounds that other 14

less intrusive measures were available, since other measures were less effective in securing the legislator's objective:

55 As the Advocate General observes in points 116 to 119 of his Opinion, no other measures aimed at imposing technical standards on manufacturers in order to reduce the harmful effects of the product, or at regulating the labelling of packagings of the product and its conditions of sale, in particular to minors, would have the same preventive effect in terms of the protection of health, inasmuch as they would let a product which is in any event harmful gain a place in the market.

48. The same point is relevant in the present case. The options which are suggested by the Plaintiff as less restrictive options are considered by the Defendant to be less effective to protect children and to denormalise the use of tobacco over time and ineffective to motivate or assist adults to give up smoking (see page 17 of the Reference).

49. Moreover, the CJEU has held in Case C-110/05 Commission v ltaly [2009] ECR l-519, concerning a prohibition of motorcycle trailers, that the burden of proof cannot be so extensive as to require the Member State to prove, positively, that no other conceivable measure could enable its legitimate objective to be attained under the same conditions (paragraphs 66 and 67).

(e) Alleged effects on competition and restrictions on trade

50. It is submitted that the principles set out above are to be applied when considering the Plaintiffs arguments that the prohibition on tobacco displays is a restrictive and disproportionate limitation to trade and on the Plaintiffs business because it is alleged to severely restrict the Plaintiffs and other producers' 'possibilities to exercise trademark based competition' (Reference page 11, paragraph 4.1). lt is inevitable that the freedom of market participants may be detrimentally affected by measures taken by national legislatures in the interests of protecting public health. As Advocate General Geelhoed stated at paragraph 229 of his opinion in Case C-491101 R v Secretary of State ex p BAT and lmperialTobacco:

[]he protection of public health is a matter of public interest which the legislature must be able to protect in full. The value of this public interest is so great that, in the legislature's assessment other matters of interest, such as the freedom of market participants, must be made subsidiary to it. This 15

holds true both for national legislative bodies and for the Community legislature in so far as the latter has taken over public health protection from national legislative bodies.

(0 Application to the present caae

51. The United Kingdom submits that the criterion to be applied in the case of a challenge to the legality of a prohibition on display of tobacco products is whether it was manifestly inappropriate for the Norwegian Legislature to conclude that the prohibition of tobacco displays could achieve the public health objectives (assumed for the purposes of the second question in its terms to be the objectives of reducing tobacco use by the public in general and especially amongst young people).

52. In the United Kingdom's view, this cannot be shown. lt appears from the Reference that a wide range of material was considered by the Norwegian Ministry and the Norwegian Legislature, including material from the World Health Organisation and the European Union and information from other countries. The legislation was based on reasonable grounds, and, especially in the context of public health, cannot be considered manifestly unreasonable or manifestly inappropriate.

CONCLUSION

53. For the reasons set out above, the United Kingdom submits that the questions referred by the Order of the Oslo tingrett dated 12 October 2010 should be answered as follows:

(1) Article 11 of the EEA Agreement should not be understood to mean that a general prohibition against the visible display of tobacco products constitutes a measure having equivalent effect to a quantitative restriction on the free movement of goods.

(2) The criterion to be applied in the case of a challenge to the legality of a prohibition on display of tobacco products is whether it was manifestly inappropriate for the national legislature to conclude that the prohibition of tobacco displays could achieve the public health objectives of reducing 16

tobacco use by the public in general and especially amongst young people.

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OBSERVATIONS submitted by the European Commission, represented by Peter Oliver, Legal Advisor, and GUnter Wilms, a Member of its Legal Service, acting as its Agents, with an address for service in Luxembourg at the office of Antonio ARESU, also of its Legal Service, B6timent BECH, 11 rue A. Wecker,2721 Luxembourg

Case E-16/10

Philip Morris Norway AS

- Plaintiff -

The State, represented by the Ministry of Health and Care Services

- Defendant -

in which the Oslo District Court has requested an Advisory Opinion from the EFTA Court pursuant to Article 34 of the Agreement between the EFTA States on the Establishment of a Surveillance Authoritv and a Court of Justice.

Commission europ6enne, B-1049 Bruxelles / Europese Commissie, B-1049 Brussel - Belgium. Telephone: (32-2) 2Sg 11 11 Office: BERL 1/24'1 . Telephone: direct line (32-2) 296.63.39. Fax: (32-2) 295.24.86. L

1. BACKGROUND

1.1. National l-egislation i. The present proceedings concern Norway's prohibition on the visible display of tobacco products at retail outlets. This measure, which is set out in the Tobacco Act of 3 April 2009, came into force on 1 January 2010.

2. Before enacting the contested legislation, Norway had already introduced a large number of measures with a view to reducing tobacco consumption, including high excise duties and a ban on selling tobacco products to persons under the age of 18. Most importantly, a total ban on advertising such products has been in place since 1975. This ban applies to all forms of marketing at retail outlets and in the media, including newspapers, radio, television and posters. lt covers both direct and indirect advertising, including the use in advertising of trade marks or logos mainly associated with advertising products.

3. No tobacco products are produced in Nonruay. The contested display ban applies irrespective of the country of origin of the product'

4. The contested ban is subject to one exception: it does not apply inside "dedicated tobacco boutiques", defined as "retail outlets which mainly sell tobacco products". These shops are not permitted, however, to display such products in such a manner that they are visible from outside the premises. According to the order for reference, the parties to the main case estimate that the total number of such boutiques in the whole of Nonruay is between 5 and 10. This compares with an estimated total of between 15,000 and 18,000 total points of sale.

5. The avowed purpose of the contested ban, as set out in the explanatory memorandum to the Bill which became the Tobacco Act 2009, was to reduce tobacco consumption, especially amongst children and young people. 6. The Commission understands that bans on the display of tobacco products have been enacted in lceland and various provinces of Canada. Within the Union, three Member States have adopted a similar ban: lreland did so in 2009; such a prohibition has also been adopted in various parts of the United Kingdom and is due to come into force in the course of 2011 (according to the Commission's information, the English legislation is currently being contested by a number of tobacco companies in the High Court of England and Wales); and Finland has followed suit, but its legislation will not take effect until the beginning of 2012.

1.2. EEA and EU Provisions

'7 Article 11 EEA, which corresponds to Article 34 TFEU, prohibits quantitative restrictions on imports and all measures of equivalent effect between the Contracting Parties. Article 13 EEA, which reproduces mutatis mutandisthe terms of Article 36 TFEU, contains a series of exceptions to this prohibition, which include an exception for public health.

B. The European Parliament and the Council have adopted various legislation on tobacco products. First, Directive 2001/37 concerning the manufacture, presentation and sale of such products prohibits the use of any words or symbols on packaging which suggests that a particular tobacco product is less harmful than others. Second, Directive 2003/33 on the advertising and sponsorship of tobacco products lays down far-reaching restrictions on these activities, notably in the press and other printed publications as well as in radio broadcasting. Finally, Directive 2010113, which is known as the Audiovisual Media Services Directive and which replaces earlier legislation, prohibits all forms of audiovisual commercial communications for these products.

L Currently, no EU legislation prohibits the display of tobacco products, However, Point 1(b) of Council Recommendation 2003154 on the prevention of smoking and on initiatives to improve tobacco control recommends Member States to remove tobacco products from self-service displays in retail outlets. Moreover, the introduction of a blanket display bank is one of the options considered in the document issued for public consultation by the Commission's Directorate-General for Health and Consumers ("DG SANCO") in 2010 (see point 6). For ease of reference, this document, entitled "Possible Revision of the Tobacco Products Directive 2001137|EC", is reproduced in Annex I to the present observations.

1.3. International Law 10. The World Health Organisation's Framework Convention on Tobacco Control of 2003 entered into force in February 2005. Norway is a Party, as are the EU and most of its Member States. Article 13(2) requires each Party "in accordance with its constitution or constitutional principles" to "undertake a comprehensive ban of all tobacco advertising, promotion and sponsorship". Where a Party is precluded by its constitution or constitutional principles from imposing a comprehensive ban, then Article 13(4) requires as a minimum that Parties restrict advertising, promotion and sponsorship. ln so far as is relevant, the Guidelines for implementation of Article 13 (Annex 2 hereto) state:

"12. Display of tobacco products at points of sale in itself constitutes advertising and promotion. Display of products is a key means of promoting tobacco products and tobacco use, including by stimulating impulse purchases of tobacco products, giving the impression that tobacco use is socially acceptable and making it harder for tobacco users to quit. Young people are particularly vulnerable to the promotional effects of product display.

13.To ensure that points of sale of tobacco products do not have any promotional elements, Parties should introduce a total ban on any display and on the visibility of tobacco products at of sale, including fixed retail outlets and street vendors. ::ittt 1.4. The National Proceedings

11. Philip Morris Norway AS has filed a legal action against the Norwegian State; claiming that the contested Nonruegian legislation is in breach of Article 11 EEA. The Oslo District Court has referred the following questions for an Advisory Opinion from the EFTA Court pursuant to Article 34 of the Agreement between the EFTA States on the Establishment of a Surveillance Authority and a Court of Justice:

"1. Shall Arlicle 11 of the EEA Agreement be understood to mean that a general prohibition against the visible display of tobacco products constitutes a measure of equivalent effect?

2. Assuming there is a restriction, which criteria would be decisive to determine whether a display restriction, based on the objective of reduced tobacco use by the public in general and especially amongst young people, would be suitable and necessary having regard to public health?"

2. LAW

2.1. Substance

2.1.1. Question I 12. A ban on the display of a product is akin to an advertising prohibition, since it is designed to reduce the visibility of the product and thus its consumption. ln effect, a prohibition on display can be regarded as an advertising ban in a more radical form. Accordingly, the case law on advertising restrictions is of direct relevance.

13. Manifestly, like an advertising restriction, a display ban must be regarded as a "selling arrangement" and thus, in the absence of de iure or de facto discrimination, it falls outside the scope of Articles 34 TFEU and 11 EEA (Cases C-267191and C-268/91 Keck [1993] ECR l-6097, paragraph 16).

14. In Case C-34/95 De Aqostini [1997] ECR l-3843, it was held that an "outright" advertising ban might entail de facto discrimination against imports (paragraphs 42 to 44), and in Case C-405/98 Courmet tnternationa [2001] ECR l-1795 the Court held that a total advertising ban did in fact involve such discrimination (paragraph 21).

15. Accordingly, it seems clear that, if there were any production of tobacco products in Noruray, the contested ban would fall under Article 1'l EEA. That is despite the very limited exception for displays within "dedicated tobacco boutiques": the ban in issue in Gourmet lnternational was also subject to cedain limited exceptions.

'16. In reality, no tobacco products are manufactured in Norway and consequently the contested ban cannot be regarded as discriminating against imports. This follows clearly from Case C-391/92 Commission v Greece t19951 ECR l-1621 where the Court held that a "selling arrangement" applicable to goods does not discriminate against imports when there is no domestic production in the Member State in question This position seems entirely logical, since it is by no means clear how discrimination against imports can exist in these circumstances. What is more, this ruling is in line with the case law on Article 110 which prohibits discriminatory internal taxation: there can be no breach of that provision in the absence of any national production (Case C-47|BB -agInnigsjg!-J Denmark [1990] ECR l-4509, paragraph 10).

17. Admittedly, in Case C-416/00 Morellato v Padova [2003] ECR l-9343, the Court appeared to reach the opposite conclusion from its finding in Commission v Greece, albeit without mentioning its earlier judgment. However, for the reasons set out in the previous paragraph, it is submitted that the ruling in Commission v Greece is to be preferred.

18. For these reasons, the Commission submits that a general prohibition on the visible display of tobacco products does not constitute a measure of equivalent effect within the meaning of Article 11 EEA where no such products are produced within the territory of the Contracting Party concerned.

19. Having said that, the Commission recognises that, even without any domestic production, a display ban is highly restrictive, since it can stifle competition between brands and make it very difficult, if not impossible, for new products to penetrate the market of the State in question. lt is therefore arguable that, even in the absence of any national production, such a ban constitutes a measure of equivalent effect on imports of the kind envisaged by the Court of Justice in the final sentence of paragraph 37 of its judgment in Case C-110/05 Commission v ltalv (Trailers) [2009] ECR l-519. ln that passage, the Court indicated that a measure which is not caught by Article 34 TFEU according to the tests set out in the established cases (notably Cases 120178 "Qasgls_ds_Qjjsn" [1979] ECR 649 and Keck) may still fall within that provision where it "hinders access ... to the market of a Member State". However, in view of the Commission's proposed answer to Question 2, the Commission would suggest that there is no need to venture on to this virgin territory, which would require a thorough analysis of the facts specific to tobacco products.

2.1.2. Question 2

20. The Court of Justice has consistently acknowledged that restrictions on advertising products which are harmful to human health may be justified on public health grounds since they serve to reduce consumption (e.9. Cases 152178 Commission v France [1980] ECR 2299, C-1./90 and C-176190 Araqonesa de Publicidad [1991] ECR l-4151). In Araqonesa de Publicidad, the Court particularly noted the "special importance" of protecting young people (paragraph 1B). As already mentioned, display bans closely resemble advertising prohibitions, since both categories of measure reduce visibility. Accordingly, the case law just quoted is equally applicable to display bans. 21. By the same token, in the Guidelines quoted in paragraph 10 above, the WHO has described the display of products as "a key means of promoting tobacco products and tobacco use" and recommended recourse to display bans. Beyond any doubt, this means that in the view of the WHO such bans Serve to reduce consumption and thus protect public health.

22. lt remains to be considered whether the ban is proportionate'

23. The Commission takes the view that the display ban is both necessary and proportionate, since the same level of protection cannot be achieved by less restrictive means. As mentioned at the outset, a range of measures designed to reduce tobacco consumption, notably a total ban on advertising, were already in place. ln the exercise of the wide cliscretion which States enjoy under the public policy exception, Norway was perfectly entitled to decide that it was necessary to limit the visibility of tobacco products further; and only a display ban could achieve this. Quite apart from its invaluable effect in protecting children and young people, no other measure can provide such effective support to individuals who are attempting to stop consuming tobacco or have already done so, by substantially reducing the risk of imPulse buYing.

24. Finally, the exception for "dedicated tobacco boutiques" does not prevent the contested legislation from being justified on public health grounds. According to the referring court, the rationale behind this exception is that the majority of customers only enter such shops if they are intending to purchase tobacco products or at least are seriously considering doing so. The display of such products within these boutiques cannot therefore be expected to encourage customers to purchase goods which they would otherwise not buy. As already mentioned, these "boutiques" are not permitted to display tobacco products in such a way that they are visible from outside the Premises. 3. CONCL|.'S|ON

25. In the light of these considerations, the Commission respectfully submits that the questions referred by the Oslo District Court should be answered as follows:

"1. A general prohibition on the visible display of tobacco products does not constitute a measure of equivalent effect within the meaning of Article 11 EEA where no such products are produced within the territory of the Contracting Party concerned..

2. However, if a general prohibition on the visible display of tobacco products does constitute a measure of equivalent effect within the meaning of Article 11 FEA, it is justified on public health grounds under Arlicle 13 EEA."

Peter Oliver GUnter Wilms Agents for the Commission 10

Annexes

Public Consultation Document issued by the Commission's Directorate- General for Health and Consumers in 2010 and entitled "Possible Revision of the Tobacco Products Directive 2001l37lEC (Paragraph 9 above)

Z Guidelines for implementation of Article 13 of the WHO Framework Convention on Tobacco Control (Paragraph 10 above)